AMC ENTERTAINMENT INC - FORM 10-Q - February 4, 2011
Attached files
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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| (Mark One) |
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ý |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 30, 2010 |
OR |
o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period
from to
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Commission file number 1-8747
AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization) |
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43-1304369
(I.R.S. Employer
Identification No.) |
920 Main
Kansas City, Missouri
(Address of principal executive offices) |
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64105
(Zip Code) |
(816) 221-4000
(Registrant's telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer ý
(Do not check if a
smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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| Title of Each Class of Common Stock |
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Number of Shares
Outstanding as of December 30, 2010 |
| Common Stock, 1¢ par value |
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1 |
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
2
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements. (Unaudited)
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
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Thirteen Weeks Ended |
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Thirty-nine Weeks Ended |
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December 30, 2010 |
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December 31, 2009 |
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December 30, 2010 |
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December 31, 2009 |
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(unaudited)
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(unaudited)
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Revenues |
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Admissions |
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$ |
427,358 |
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$ |
444,420 |
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$ |
1,334,527 |
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$ |
1,281,145 |
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| |
Concessions |
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160,038 |
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166,867 |
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515,709 |
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487,908 |
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Other theatre |
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15,471 |
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15,895 |
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47,208 |
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44,493 |
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Total revenues |
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602,867 |
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627,182 |
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1,897,444 |
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1,813,546 |
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| |
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Operating Costs and Expenses |
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Film exhibition costs |
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223,642 |
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239,275 |
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704,646 |
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696,704 |
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Concession costs |
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19,760 |
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18,378 |
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64,061 |
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53,448 |
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Operating expense |
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174,670 |
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155,597 |
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496,146 |
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449,165 |
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| |
Rent |
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120,086 |
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110,423 |
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356,121 |
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331,107 |
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General and administrative: |
|
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|
|
|
|
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|
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|
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Merger, acquisition and transaction costs |
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2,196 |
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|
485 |
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13,171 |
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|
706 |
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| |
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Management fee |
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1,250 |
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1,250 |
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3,750 |
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3,750 |
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| |
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Other |
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10,192 |
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14,697 |
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41,250 |
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40,768 |
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Depreciation and amortization |
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55,937 |
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47,472 |
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156,895 |
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142,949 |
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Operating costs and expenses |
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607,733 |
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587,577 |
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1,836,040 |
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1,718,597 |
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| |
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Operating income (loss) |
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(4,866 |
) |
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39,605 |
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61,404 |
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94,949 |
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| |
Other expense (income) |
|
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|
|
|
|
|
|
|
|
|
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| |
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Other expense (income) |
|
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8,834 |
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(2,135 |
) |
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(851 |
) |
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(300 |
) |
| |
|
Interest expense |
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|
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|
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| |
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Corporate borrowings |
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35,062 |
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32,179 |
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100,812 |
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93,459 |
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| |
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Capital and financing lease obligations |
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1,596 |
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1,413 |
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4,604 |
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4,239 |
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|
Equity in earnings of non-consolidated entities |
|
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(13,491 |
) |
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(7,517 |
) |
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(17,057 |
) |
|
(18,127 |
) |
| |
|
Gain on NCM, Inc. stock sale |
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— |
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— |
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|
(64,648 |
) |
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— |
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| |
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Investment income |
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(205 |
) |
|
(36 |
) |
|
(309 |
) |
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(167 |
) |
| |
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|
|
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|
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| |
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Total other expense |
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31,796 |
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23,904 |
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22,551 |
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79,104 |
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Earnings (loss) from continuing operations before income taxes |
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(36,662 |
) |
|
15,701 |
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38,853 |
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15,845 |
|
Income tax provision (benefit) |
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(3,250 |
) |
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(50 |
) |
|
2,550 |
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|
— |
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| |
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Earnings (loss) from continuing operations |
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(33,412 |
) |
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15,751 |
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36,303 |
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15,845 |
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Earnings from discontinued operations, net of income taxes |
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|
599 |
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|
544 |
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574 |
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1,086 |
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| |
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|
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Net earnings (loss) |
|
$ |
(32,813 |
) |
$ |
16,295 |
|
$ |
36,877 |
|
$ |
16,931 |
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| |
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|
See
Notes to Consolidated Financial Statements.
3
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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December 30, 2010 |
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April 1, 2010 |
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(unaudited)
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ASSETS |
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Current assets: |
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| |
Cash and equivalents |
|
$ |
686,167 |
|
$ |
495,343 |
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| |
Receivables, net |
|
|
68,323 |
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|
25,545 |
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Other current assets |
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82,107 |
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73,312 |
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| |
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Total current assets |
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836,597 |
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594,200 |
|
Property, net |
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985,893 |
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863,532 |
|
Intangible assets, net |
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154,552 |
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148,432 |
|
Goodwill |
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1,913,906 |
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1,814,738 |
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Other long-term assets |
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318,469 |
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232,275 |
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| |
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| |
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Total assets |
|
$ |
4,209,417 |
|
$ |
3,653,177 |
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| |
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LIABILITIES AND STOCKHOLDER'S EQUITY |
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Current liabilities: |
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| |
Accounts payable |
|
$ |
193,326 |
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$ |
175,142 |
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| |
Accrued expenses and other liabilities |
|
|
133,837 |
|
|
139,581 |
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| |
Deferred revenues and income |
|
|
165,553 |
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|
125,842 |
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| |
Current maturities of corporate borrowings and capital and financing lease obligations |
|
|
240,052 |
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|
10,463 |
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| |
|
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| |
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Total current liabilities |
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|
732,768 |
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|
451,028 |
|
Corporate borrowings |
|
|
2,098,982 |
|
|
1,826,354 |
|
Capital and financing lease obligations |
|
|
63,086 |
|
|
53,323 |
|
Deferred revenues—for exhibitor services agreement |
|
|
360,443 |
|
|
252,322 |
|
Other long-term liabilities |
|
|
354,940 |
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|
309,591 |
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| |
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| |
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Total liabilities |
|
$ |
3,610,219 |
|
$ |
2,892,618 |
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| |
|
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|
Commitments and contingencies |
|
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Stockholder's equity: |
|
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| |
Common Stock, 1 share issued with 1¢ par value |
|
|
— |
|
|
— |
|
| |
Additional paid-in capital |
|
|
629,489 |
|
|
828,687 |
|
| |
Accumulated other comprehensive loss |
|
|
(2,216 |
) |
|
(3,176 |
) |
| |
Accumulated deficit |
|
|
(28,075 |
) |
|
(64,952 |
) |
| |
|
|
|
|
|
| |
|
Total stockholder's equity |
|
|
599,198 |
|
|
760,559 |
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| |
|
|
|
|
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| |
|
Total liabilities and stockholder's equity |
|
$ |
4,209,417 |
|
$ |
3,653,177 |
|
| |
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
4
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
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|
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|
|
Thirty-nine Weeks Ended |
|
|
|
December 30, 2010 |
|
December 31, 2009 |
|
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|
(unaudited)
|
|
INCREASE (DECREASE) IN CASH AND EQUIVALENTS |
|
|
|
|
|
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|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net earnings |
|
$ |
36,877 |
|
$ |
16,931 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
|
|
|
|
| |
Depreciation and amortization |
|
|
156,895 |
|
|
142,949 |
|
| |
Deferred income taxes |
|
|
— |
|
|
(1,500 |
) |
| |
Loss on extinguishment and modification of debt |
|
|
7,849 |
|
|
3,468 |
|
| |
Gain on NCM, Inc. stock sale |
|
|
(64,648 |
) |
|
— |
|
| |
Equity in earnings and losses from non-consolidated entities, net of distributions |
|
|
4,347 |
|
|
3,537 |
|
| |
Gain on dispositions |
|
|
(10,293 |
) |
|
(1,086 |
) |
| |
Change in assets and liabilities, net of acquisition: |
|
|
|
|
|
|
|
| |
|
|
Receivables |
|
|
(37,828 |
) |
|
(38,590 |
) |
| |
|
|
Other assets |
|
|
(881 |
) |
|
1,272 |
|
| |
|
|
Accounts payable |
|
|
(7,578 |
) |
|
53,245 |
|
| |
|
|
Accrued expenses and other liabilities |
|
|
27,816 |
|
|
71,566 |
|
| |
Other, net |
|
|
2,255 |
|
|
(5,412 |
) |
| |
|
|
|
|
|
| |
Net cash provided by operating activities |
|
|
114,811 |
|
|
246,380 |
|
| |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
(84,085 |
) |
|
(59,482 |
) |
| |
Acquisition of Kerasotes, net of cash acquired |
|
|
(280,606 |
) |
|
— |
|
| |
Proceeds from NCM, Inc. stock sale |
|
|
102,224 |
|
|
— |
|
| |
Proceeds from disposition of Cinemex |
|
|
1,845 |
|
|
4,342 |
|
| |
Proceeds from the disposition of long-term assets |
|
|
58,391 |
|
|
— |
|
| |
Other, net |
|
|
3,882 |
|
|
(4,542 |
) |
| |
|
|
|
|
|
| |
Net cash used in investing activities |
|
|
(198,349 |
) |
|
(59,682 |
) |
| |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
| |
Repayment under Revolving Credit Facility |
|
|
— |
|
|
(185,000 |
) |
| |
Repurchase of Fixed Notes due 2012 |
|
|
— |
|
|
(250,000 |
) |
| |
Repurchase of Senior Subordinated Notes due 2016 |
|
|
(95,098 |
) |
|
— |
|
| |
Payment of tender offer and consent solicitation consideration |
|
|
|
|
|
|
|
| |
|
on Senior Subordinated Notes due 2016 |
|
|
(5,801 |
) |
|
— |
|
| |
Proceeds from issuance of Senior Subordinated Notes due 2020 |
|
|
600,000 |
|
|
— |
|
| |
Proceeds from issuance of Senior Notes due 2019 |
|
|
— |
|
|
585,492 |
|
| |
Deferred financing costs |
|
|
(13,665 |
) |
|
(16,257 |
) |
| |
Principal payments under capital and financing lease obligations |
|
|
(3,133 |
) |
|
(2,567 |
) |
| |
Principal payments under Term Loan B |
|
|
(3,250 |
) |
|
(4,875 |
) |
| |
Change in construction payables |
|
|
(4,037 |
) |
|
722 |
|
| |
Dividends paid to Marquee Holdings Inc. |
|
|
(200,218 |
) |
|
(315,351 |
) |
| |
|
|
|
|
|
| |
Net cash provided by (used in) financing activities |
|
|
274,798 |
|
|
(187,836 |
) |
| |
Effect of exchange rate changes on cash and equivalents |
|
|
(436 |
) |
|
(2,226 |
) |
| |
|
|
|
|
|
Net increase (decrease) in cash and equivalents |
|
|
190,824 |
|
|
(3,364 |
) |
Cash and equivalents at beginning of period |
|
|
495,343 |
|
|
534,009 |
|
| |
|
|
|
|
|
Cash and equivalents at end of period |
|
$ |
686,167 |
|
$ |
530,645 |
|
| |
|
|
|
|
|
See Notes to Consolidated Financial Statements.
5
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 30, 2010
(Unaudited)
NOTE 1—BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE" or the "Company") is an intermediate holding company, which, through its direct and indirect subsidiaries, including American
Multi-Cinema, Inc. ("AMC") and its subsidiaries, and AMC Entertainment International, Inc. ("AMCEI") and its subsidiaries (collectively with AMCE, unless the context otherwise requires,
the "Company"), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres located in the United States, Canada, China (Hong Kong), France and
the United Kingdom.
AMCE
is a wholly owned subsidiary of Marquee Holdings Inc. ("Holdings"), an investment vehicle owned through AMC Entertainment Holdings, Inc. ("Parent") by J.P. Morgan
Partners, LLC and certain
related investment funds ("JPMP"), Apollo Management, L.P. and certain related investment funds ("Apollo") and affiliates of Bain Capital Partners ("Bain"), The Carlyle Group ("Carlyle") and
Spectrum Equity Investors ("Spectrum") (collectively with JPMP and Apollo, the "Sponsors").
As
discussed in Note 10—Corporate Borrowings, Holdings redeemed all remaining outstanding Discount Notes due 2014 on January 3, 2011. Holdings is expected to
merge with Parent, with Parent continuing as the holding company for AMCE, subsequent to December 30, 2010.
The
accompanying unaudited consolidated financial statements have been prepared in response to the requirements of Form 10-Q and should be read in conjunction with the
Company's Annual report on Form 10-K for the year ended April 1, 2010. In the opinion of management, these interim financial statements reflect all adjustments (consisting of
normal recurring adjustments) necessary for a fair statement of the Company's financial position and results of operations. Due to the seasonal nature of the Company's business, results for the
thirty-nine weeks ended December 30, 2010 are not necessarily indicative of the results to be expected for the fiscal year (52 weeks) ending March 31, 2011. The
Company manages its business under one operating segment called Theatrical Exhibition.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to: (1) Impairment charges, (2) Film exhibition costs,
(3) Income and operating taxes and (4) Gift card and packaged ticket revenues. Actual results could differ from those estimates.
The
April 1, 2010 consolidated balance sheet data was derived from the audited balance sheet included in the Form 10-K, but does not include all disclosures
required by generally accepted accounting principles.
6
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 1—BASIS OF PRESENTATION (Continued)
Other Expense (Income): The following table sets forth the components of other expense (income):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Loss on redemption of 85/8% Senior Notes due 2012 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
11,276 |
|
Loss on redemption of 11% Senior Subordinated Notes due 2016 |
|
|
7,631 |
|
|
— |
|
|
7,631 |
|
|
— |
|
Loss on modification of Senior Secured Credit Facility Term Loan due 2013 |
|
|
3,046 |
|
|
— |
|
|
3,046 |
|
|
— |
|
Loss on modification of Senior Secured Credit Facility Revolver |
|
|
367 |
|
|
— |
|
|
367 |
|
|
— |
|
Gift card redemptions considered to be remote |
|
|
(2,201 |
) |
|
(2,079 |
) |
|
(11,754 |
) |
|
(11,501 |
) |
Other income |
|
|
(9 |
) |
|
(56 |
) |
|
(141 |
) |
|
(75 |
) |
| |
|
|
|
|
|
|
|
|
|
Other expense (income) |
|
$ |
8,834 |
|
$ |
(2,135 |
) |
$ |
(851 |
) |
$ |
(300 |
) |
| |
|
|
|
|
|
|
|
|
|
Presentation: Effective April 1, 2010, preopening expense, theatre and other closure expense (income), and disposition of
assets and other
losses (gains) were reclassified to operating expense with a conforming reclassification made for the prior year presentation. Additionally, in the Consolidated Statements of Cash Flows, certain
operating activities were reclassified to other, net and certain investing activities were reclassified to other, net, with conforming reclassifications made for the prior year presentation. These
presentation reclassifications reflect how management evaluates information presented in the Consolidated Statement of Operations and Consolidated Statements of Cash Flows.
NOTE 2—ACQUISITION
On May 24, 2010, the Company completed the acquisition of substantially all of the assets (92 theatres
and 928 screens) of Kerasotes Showplace Theatres, LLC ("Kerasotes"). Kerasotes operated 95 theatres and 972 screens in mid-sized, suburban and metropolitan markets,
primarily in the Midwest. More than three quarters of the Kerasotes theatres feature stadium seating and almost 90 percent have been built since 1994. The Company acquired Kerasotes based on
their highly complementary geographic presence in certain key markets. Additionally, the Company expects to realize synergies and cost savings related to the Kerasotes acquisition as a result of
moving to the Company's operating practices, decreasing costs for newspaper advertising and concessions and general and administrative expense savings, particularly with respect to the consolidation
of corporate related functions and elimination of redundancies. The purchase price for the Kerasotes theatres paid in cash at closing was $276,798,000, net of cash acquired, and was subject to working
capital and other purchase price adjustments as described in the Unit Purchase Agreement. The Company paid working capital and other purchase price adjustments of $3,808,000 during the second quarter
of fiscal 2011, based on the final closing date working capital and deferred revenue amounts, and has included this amount as part of the total estimated purchase price.
7
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 2—ACQUISITION (Continued)
The
acquisition of Kerasotes is being treated as a purchase in accordance with Accounting Standards Codification, ("ASC") 805, Business
Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The allocation of purchase
price is based on management's judgment after evaluating several factors, including bid prices from potential buyers and a preliminary valuation assessment. The allocation of purchase price is subject
to changes as an appraisal of both tangible and intangible assets and liabilities is finalized and additional information becomes available; however, we do not expect material changes. The following
is a summary of the preliminary allocation of the purchase price:
|
|
|
|
|
(In thousands)
|
|
Total |
|
Cash |
|
$ |
809 |
|
Receivables, net(1) |
|
|
3,832 |
|
Other current assets |
|
|
12,905 |
|
Property, net |
|
|
205,104 |
|
Intangible assets, net(2) |
|
|
17,387 |
|
Goodwill(3) |
|
|
109,839 |
|
Other long-term assets |
|
|
5,920 |
|
Accounts payable |
|
|
(13,538 |
) |
Accrued expenses and other liabilities |
|
|
(12,439 |
) |
Deferred revenues and income |
|
|
(1,806 |
) |
Capital and financing lease obligations |
|
|
(12,583 |
) |
Other long-term liabilities(4) |
|
|
(34,015 |
) |
| |
|
|
|
Total estimated purchase price |
|
$ |
281,415 |
|
| |
|
|
|
- (1)
- Receivables
consist of trade receivables recorded at fair value. The Company did not acquire any other class of receivables as a result of the acquisition
of Kerasotes.
- (2)
- Intangible
assets consist of certain Kerasotes' trade names, a non-compete agreement, and favorable leases. See
Note 4—Goodwill and Intangible Assets for further information.
- (3)
- Goodwill
arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations. Amounts recorded for
goodwill are not subject to amortization and are expected to be deductible for tax purposes.
- (4)
- Other
long-term liabilities consist of certain theatre and ground leases that have been identified as unfavorable.
During
the thirty-nine weeks ended December 30, 2010, the Company incurred acquisition-related costs for Kerasotes of approximately $12,100,000, which are included in
general and administrative expense: merger, acquisition and transaction costs in the Consolidated Statements of Operations.
8
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 2—ACQUISITION (Continued)
In
connection with the acquisition of Kerasotes, the Company divested of seven Kerasotes theatres with 85 screens as required by the Antitrust Division of the United States Department of
Justice. The Company also sold the Kerasotes digital projector systems and one vacant theatre that had previously been closed by Kerasotes. Proceeds from the divested theatres and other property
exceeded the carrying amount by approximately $10,671,000, which was recorded as a reduction to goodwill.
The
Company was also required by the Antitrust Division of the United States Department of Justice to divest of four legacy AMC theatres with 57 screens. The Company recorded a
gain on disposition of assets of $10,056,000 for one divested legacy theatre with 14 screens during the thirty-nine weeks ended December 30, 2010, which reduced operating
expenses by approximately $10,056,000. Additionally, the Company acquired two theatres with 26 screens that were received in exchange for three of the legacy AMC theatres with
43 screens.
The
unaudited pro forma financial information presented below sets forth the Company's historical statements of operations for the periods indicated and gives effect to the acquisition
as if the business combination and required divestitures had occurred as of the beginning of fiscal 2010. Such information is presented for comparative purposes to the Consolidated Statements of
Operations only and does not purport to represent what the Company's results of operations would actually have been had these
9
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 2—ACQUISITION (Continued)
transactions
occurred on the date indicated or to project its results of operations for any future period or date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
|
|
Pro forma
December 30,
2010 |
|
Pro forma
December 31,
2009 |
|
Pro forma
December 30,
2010 |
|
Pro forma
December 31,
2009 |
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
426,941 |
|
$ |
491,712 |
|
$ |
1,353,095 |
|
$ |
1,414,796 |
|
| |
Concessions |
|
|
159,887 |
|
|
188,147 |
|
|
524,362 |
|
|
549,409 |
|
| |
Other theatre |
|
|
15,461 |
|
|
17,808 |
|
|
47,996 |
|
|
50,463 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues |
|
|
602,289 |
|
|
697,667 |
|
|
1,925,453 |
|
|
2,014,668 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
|
223,421 |
|
|
263,861 |
|
|
714,478 |
|
|
766,982 |
|
| |
Concession costs |
|
|
19,740 |
|
|
21,116 |
|
|
65,490 |
|
|
61,074 |
|
| |
Operating expense |
|
|
174,409 |
|
|
172,027 |
|
|
512,110 |
|
|
501,355 |
|
| |
Rent |
|
|
119,946 |
|
|
120,082 |
|
|
360,374 |
|
|
359,551 |
|
| |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs* |
|
|
2,196 |
|
|
485 |
|
|
13,171 |
|
|
706 |
|
| |
|
Management fee |
|
|
1,250 |
|
|
1,250 |
|
|
3,750 |
|
|
3,750 |
|
| |
|
Other |
|
|
10,192 |
|
|
19,955 |
|
|
42,901 |
|
|
53,519 |
|
| |
Depreciation and amortization |
|
|
55,937 |
|
|
53,837 |
|
|
160,454 |
|
|
161,392 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Operating costs and expenses |
|
|
607,091 |
|
|
652,613 |
|
|
1,872,728 |
|
|
1,908,329 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Operating income (loss) |
|
|
(4,802 |
) |
|
45,054 |
|
|
52,725 |
|
|
106,339 |
|
| |
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other expense (income) |
|
|
8,834 |
|
|
(2,135 |
) |
|
(851 |
) |
|
(300 |
) |
| |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Corporate borrowings |
|
|
35,062 |
|
|
32,179 |
|
|
100,812 |
|
|
93,459 |
|
| |
|
|
Capital and financing lease obligations |
|
|
1,596 |
|
|
1,629 |
|
|
4,820 |
|
|
4,887 |
|
| |
|
Equity in earnings of non-consolidated entities |
|
|
(13,491 |
) |
|
(7,517 |
) |
|
(17,057 |
) |
|
(18,127 |
) |
| |
|
Gain on NCM, Inc. stock sale |
|
|
— |
|
|
— |
|
|
(64,648 |
) |
|
— |
|
| |
|
Investment (income) expense |
|
|
(205 |
) |
|
216 |
|
|
(309 |
) |
|
281 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total other expense |
|
|
31,796 |
|
|
24,372 |
|
|
22,767 |
|
|
80,200 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income taxes |
|
|
(36,598 |
) |
|
20,682 |
|
|
29,958 |
|
|
26,139 |
|
Income tax provision (benefit) |
|
|
(3,150 |
) |
|
1,750 |
|
|
(750 |
) |
|
3,700 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
(33,448 |
) |
|
18,932 |
|
|
30,708 |
|
|
22,439 |
|
Earnings from discontinued operations, net of income taxes |
|
|
599 |
|
|
544 |
|
|
574 |
|
|
1,086 |
|
| |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(32,849 |
) |
$ |
19,476 |
|
$ |
31,282 |
|
$ |
23,525 |
|
| |
|
|
|
|
|
|
|
|
|
- *
- Primarily
represents non-recurring transaction costs for the acquisition and related transactions.
10
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 2—ACQUISITION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
|
|
Pro forma
December 30,
2010 |
|
Pro forma
December 31,
2009 |
|
Pro forma
December 30,
2010 |
|
Pro forma
December 31,
2009 |
|
Average Screens—continuing operations(1) |
|
|
5,163 |
|
|
5,248 |
|
|
5,197 |
|
|
5,287 |
|
- (1)
- Includes
consolidated theatres only.
The
Company recorded revenues of approximately $168,300,000 from May 24, 2010 through December 30, 2010 resulting from the acquisition of Kerasotes, and recorded operating
costs and expenses of approximately $174,900,000, including $20,500,000 of depreciation and amortization and $12,100,000 of merger, acquisition and transaction costs. The Company recorded $655,000 of
other expense related to Kerasotes.
NOTE 3—COMPREHENSIVE EARNINGS (LOSS)
The components of comprehensive earnings (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Net earnings (loss) |
|
$ |
(32,813 |
) |
$ |
16,295 |
|
$ |
36,877 |
|
$ |
16,931 |
|
Foreign currency translation adjustment |
|
|
(1,259 |
) |
|
(2,641 |
) |
|
(2,607 |
) |
|
(13,443 |
) |
Pension and other benefit adjustments |
|
|
(220 |
) |
|
(213 |
) |
|
(502 |
) |
|
(474 |
) |
Change in fair value of cash flow hedges |
|
|
— |
|
|
— |
|
|
— |
|
|
(6 |
) |
Losses on interest rate swaps reclassified to interest expense: corporate borrowings |
|
|
— |
|
|
— |
|
|
— |
|
|
558 |
|
Increase in unrealized gain on marketable securities |
|
|
3,152 |
|
|
81 |
|
|
4,069 |
|
|
644 |
|
| |
|
|
|
|
|
|
|
|
|
Total comprehensive earnings (loss) |
|
$ |
(31,140 |
) |
$ |
13,522 |
|
$ |
37,837 |
|
$ |
4,210 |
|
| |
|
|
|
|
|
|
|
|
|
11
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 4—GOODWILL AND INTANGIBLE ASSETS
Activity of goodwill is presented below.
|
|
|
|
|
|
(In thousands)
|
|
Total |
|
Balance as of April 1, 2010 |
|
$ |
1,814,738 |
|
| |
Acquisition of Kerasotes |
|
|
109,839 |
|
| |
Goodwill allocated to sales(1) |
|
|
(10,671 |
) |
| |
|
|
|
Balance as of December 30, 2010 |
|
$ |
1,913,906 |
|
| |
|
|
|
- (1)
- Reduction
in goodwill for sales of eight Kerasotes theatres and other property. Subsequent to the acquisition, the Company was required to sell certain
acquired theatres to comply with government requirements related to the sale. No gains or losses were recorded for these transactions.
Activity
for intangible assets is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2010 |
|
April 1, 2010 |
|
(In thousands)
|
|
Remaining
Useful Life |
|
Gross Carrying
Amount |
|
Accumulated
Amortization |
|
Gross Carrying
Amount |
|
Accumulated
Amortization |
|
Acquired Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Amortizable Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Favorable leases |
|
2 to 11 years |
|
$ |
110,231 |
|
$ |
(51,379 |
) |
$ |
104,646 |
|
$ |
(44,127 |
) |
| |
Loyalty program |
|
3 years |
|
|
46,000 |
|
|
(41,147 |
) |
|
46,000 |
|
|
(38,870 |
) |
| |
Loews' trade name |
|
— |
|
|
2,300 |
|
|
(2,265 |
) |
|
2,300 |
|
|
(1,920 |
) |
| |
Loews' management contracts |
|
12 to 21 years |
|
|
35,400 |
|
|
(29,480 |
) |
|
35,400 |
|
|
(29,209 |
) |
| |
Non-compete agreement |
|
5 years |
|
|
6,406 |
|
|
(764 |
) |
|
— |
|
|
— |
|
| |
Other intangible assets |
|
1 to 12 years |
|
|
13,309 |
|
|
(13,115 |
) |
|
13,309 |
|
|
(13,097 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Total, amortizable |
|
|
|
$ |
213,646 |
|
$ |
(138,150 |
) |
$ |
201,655 |
|
$ |
(127,223 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Unamortizable Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AMC trademark |
|
|
|
$ |
74,000 |
|
|
|
|
$ |
74,000 |
|
|
|
|
| |
Kerasotes trade names |
|
|
|
|
5,056 |
|
|
|
|
|
— |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total, unamortizable |
|
|
|
$ |
79,056 |
|
|
|
|
$ |
74,000 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 4—GOODWILL AND INTANGIBLE ASSETS (Continued)
Additional
information for Kerasotes intangible assets acquired on May 24, 2010 is presented below:
|
|
|
|
|
|
|
|
(In thousands)
|
|
Weighted Average
Amortization Period |
|
Gross Carrying
Amount |
|
Acquired Intangible Assets: |
|
|
|
|
|
|
| |
Amortizable Intangible Assets: |
|
|
|
|
|
|
| |
Favorable leases |
|
3.6 years |
|
$ |
5,585 |
|
| |
Non-compete agreement |
|
5 years |
|
|
6,406 |
|
| |
Management agreement(1) |
|
|
|
|
340 |
|
| |
|
|
|
|
|
| |
Total, amortizable |
|
4.3 years |
|
$ |
12,331 |
|
| |
|
|
|
|
|
Unamortizable Intangible Assets: |
|
|
|
|
|
|
| |
Kerasotes trade names |
|
|
|
$ |
5,056 |
|
| |
|
|
|
|
|
- (1)
- The
management agreement intangible asset was disposed of as required by the Department of Justice.
Amortization
expense associated with the Company's intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30, 2010 |
|
December 31, 2009 |
|
December 30, 2010 |
|
December 31, 2009 |
|
Recorded amortization |
|
$ |
3,805 |
|
$ |
3,245 |
|
$ |
10,927 |
|
$ |
10,689 |
|
Estimated
amortization expense for the next five fiscal years for intangible assets owned as of December 30, 2010 is projected below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
Projected amortization expense |
|
$ |
14,652 |
|
$ |
14,014 |
|
$ |
12,582 |
|
$ |
9,516 |
|
$ |
8,660 |
|
NOTE 5—STOCKHOLDER'S EQUITY
AMCE has one share of Common Stock issued as of December 30, 2010, which is owned by Holdings. Holdings has one share of Common Stock issued as of December 30, 2010, which
is owned by Parent.
During
September of 2010, AMCE used cash on hand to pay a dividend distribution to Holdings in an aggregate amount of $15,184,000. Holdings and Parent used the available funds to make a
cash interest payment on the 12% Senior Discount Notes due 2014 and pay corporate overhead expenses incurred in the ordinary course of business.
During
December of 2010, AMCE used cash on hand to pay a dividend distribution to Holdings in an aggregate amount of $185,034,000. Holdings used the available funds to make a cash
payment related to a tender offer for the 12% Senior Discount Notes due 2014.
13
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 5—STOCKHOLDER'S EQUITY (Continued)
Stock-Based Compensation
The Company has no stock-based compensation arrangements of its own, but Parent has adopted a stock-based compensation plan that
permits a maximum of 49,107.44681 options to be issued on Parent's stock under the amended and restated 2004 Stock Option Plan. The stock options have a ten year term and generally step vest in equal
amounts from one to three or five years from the date of the grant. Vesting may accelerate for a certain participant if there is a change of control (as defined in the plan). All outstanding options
have been granted to employees and one director of the Company. The Company accounts for stock options using the fair value method of accounting and has elected to use the simplified method for
estimating the expected term of "plain vanilla" share option grants, as it does not have enough historical experience to provide a reasonable estimate.
On
July 8, 2010, the Board approved a grant of 1,023 non-qualified stock options to a certain employee of the Company under the amended and restated 2004 Stock Option
Plan. These options vest ratably over 5 years with an exercise price of $752 per share. Expense for this award will be recognized on a straight-line basis over the vesting period.
See 2010 Equity Incentive Plan below for further information regarding assumptions used in determining fair value. On July 23, 2010, the Board determined that the Company would no longer grant
any awards of shares of common stock of the Company under the amended and restated 2004 Stock Option Plan.
2010 Equity Incentive Plan
On July 8, 2010, the Board of Directors (the "Board") of Parent and the stockholders of Parent approved the adoption of the AMC
Entertainment Holdings, Inc. 2010 Equity Incentive Plan (the "Plan"). The Plan provides for grants of non-qualified stock options, incentive stock options, stock appreciation rights
("SARs"), restricted stock awards, other stock-based awards or performance-based compensation awards.
Subject
to adjustment as provided for in the Plan, (i) the aggregate number of shares of common stock of Parent available for delivery pursuant to awards granted under the Plan is
39,312 shares, (ii) the number of shares available for granting incentive stock options under the Plan will not exceed 19,652 shares and (iii) the maximum number of shares that may be
granted to a participant each year is 7,862.
On
July 8, 2010, the Board approved the grants of non-qualified stock options, restricted stock (time vesting), and restricted stock (performance vesting) to certain
of its employees. The estimated fair value of the stock at the grant date was approximately $752 per share and was based upon a contemporaneous valuation reflecting market conditions. The award
agreements under the Plan generally have the following features, subject to discretionary approval by Parent's compensation committee:
- •
- Non-Qualified Stock Option Award Agreement: The Board approved the grant of 5,399 stock options, of which
5,354 stock options have been granted. Twenty-five percent of the options will vest on each of the first four anniversaries of the date of grant; provided, however, that the options will
become fully vested and exercisable if within one year following a Change of Control (as defined in the Plan), the participant's service is terminated by the Company without
14
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 5—STOCKHOLDER'S EQUITY (Continued)
cause.
The stock options have a ten year term from the date of grant. The estimated grant date fair value of the options granted on 5,354 shares was $293.72 per share, or $1,573,000, and was
determined using the Black-Scholes option-pricing model. The option exercise price was $752 per share, and the estimated fair value of the shares was $752, resulting in $0 intrinsic value for the
option grants.
- •
- Restricted Stock Award Agreement (Time Vesting): The Board approved the grant of 5,399 shares of restricted stock (time
vesting), of which 5,354 shares have been granted. The restricted shares will become vested on the fourth anniversary of the date of grant; provided, however, that the restricted shares will become
fully vested if within one year following a Change of Control, the participant's service is terminated by the Company without cause. The estimated grant date fair value for the 5,354 shares of
restricted stock (time vesting) granted was $4,028,000, or approximately $752 per share.
- •
- Restricted Stock Award Agreement (Performance Vesting): The Board approved the grant of 5,404 shares of restricted stock
(performance vesting), of which 1,339 shares have been granted. Approximately twenty-five percent of the total restricted shares of 5,404 approved by the Board will be granted each year
over a four-year period. Each grant has a vesting term of approximately one year upon the Company meeting certain pre-established annual performance targets; provided, however,
that the restricted shares will become fully vested if within one year following a Change of Control, the participant's service is terminated by the Company without cause. The fiscal 2011 performance
target was established at the grant date following ASC 718-10-55-95 and the estimated grant date fair value was $1,008,000, or approximately $752 per share.
During the third quarter of fiscal 2011, it was determined to be improbable for the Company to meet its pre-established annual performance target for fiscal 2011. The Company discontinued
recognizing compensation cost for the restricted stock (performance vesting) grant for fiscal 2011 and reversed compensation cost previously recognized in prior quarters.
A
summary of stock option activity under both the amended and restated 2004 Option Plan and the 2010 Equity Incentive Plan is as follows:
|
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
Weighted Average
Exercise Price
Per Share |
|
Outstanding at April 1, 2010 |
|
|
31,597.1680905 |
|
$ |
383.58 |
|
Granted |
|
|
6,377.0000000 |
|
|
752.00 |
|
Forfeited |
|
|
(1,478.4000000 |
) |
|
370.83 |
|
Exercised |
|
|
(804.6000000 |
) |
|
452.50 |
|
| |
|
|
|
|
|
Outstanding at December 30, 2010 |
|
|
35,691.1680905 |
|
$ |
448.38 |
|
| |
|
|
|
|
|
Exercisable at December 30, 2010 |
|
|
14,179.4080901 |
|
$ |
445.31 |
|
| |
|
|
|
|
|
15
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 5—STOCKHOLDER'S EQUITY (Continued)
The
following table represents the restricted stock activity for the thirty-nine weeks ended December 30, 2010:
|
|
|
|
|
|
|
|
|
|
Shares of
Restricted Stock |
|
Weighted Average
Grant Date
Fair Value |
|
Unvested at April 1, 2010 |
|
|
— |
|
$ |
— |
|
Granted |
|
|
6,693 |
|
|
752.00 |
|
Forfeited |
|
|
(140 |
) |
|
752.00 |
|
| |
|
|
|
|
|
Unvested at December 30, 2010 |
|
|
6,553 |
|
$ |
752.00 |
|
| |
|
|
|
|
|
Compensation
expense for stock options and restricted stock are recognized on a straight-line basis (net of estimated forfeitures) over the requisite service period, which is
generally the vesting period of the award. The Company has recorded stock-based compensation expense of $156,000 and $410,000 within general and administrative: other during the thirteen weeks ended
December 30, 2010, and December 31, 2009, respectively. The Company has recorded stock-based compensation expense of $1,020,000 and $1,248,000 within general and administrative: other
during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. The Company's financial statements reflect an increase to additional
paid-in capital related to stock-based compensation for awards and all outstanding options of $1,020,000 during fiscal 2011. As of December 30, 2010, there was approximately
$6,729,000 of total estimated unrecognized compensation cost related to nonvested stock-based compensation arrangements under both the 2010 Equity Incentive Plan and the 2004 Stock Option Plan
expected to be recognized over a weighted average 3.5 years.
The
following table reflects the weighted average fair value per option granted under the amended and restated 2004 Option Plan and the 2010 Equity Incentive Plan during the
thirty-nine
weeks ended December 31, 2010, as well as the significant assumptions used in determining weighted average fair value using the Black-Scholes option-pricing model:
|
|
|
|
|
|
|
|
|
|
2010 Plan |
|
2004 Plan |
|
Weighted average fair value of options on grant date |
|
$ |
293.72 |
|
$ |
300.91 |
|
Risk-free interest rate |
|
|
2.50 |
% |
|
2.58 |
% |
Expected life (years) |
|
|
6.25 |
|
|
6.50 |
|
Expected volatility(1) |
|
|
35.0 |
% |
|
35.0 |
% |
Expected dividend yield |
|
|
— |
|
|
— |
|
- (1)
- The
Company uses share values of its publicly traded competitor peer group for purposes of calculating volatility.
16
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 6—INVESTMENTS
Investments in non-consolidated affiliates and certain other investments accounted for following the equity method generally include all entities in which the Company or its subsidiaries
have significant influence, but not more than 50% voting control. Investments in non-consolidated affiliates as of December 30, 2010, include a 16.98% interest in National CineMedia, LLC
("NCM"), a 50% interest in three U.S. motion picture theatres, a 26% equity interest in Movietickets.com ("MTC"), a 50% interest in Midland Empire Partners, LLC ("MEP") and a 29% interest in Digital
Cinema Implementation Partners, LLC ("DCIP"). Indebtedness held by equity method investees is non-recourse to the Company.
Condensed
financial information of our non-consolidated equity method investments is shown below. Amounts are presented under U.S. GAAP for the periods of ownership by the Company.
Operating
Results(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Revenues |
|
$ |
147,173 |
|
$ |
133,070 |
|
$ |
410,528 |
|
$ |
344,719 |
|
Operating costs and expenses |
|
|
86,381 |
|
|
81,574 |
|
|
300,301 |
|
|
234,028 |
|
| |
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
60,792 |
|
$ |
51,496 |
|
$ |
110,227 |
|
$ |
110,691 |
|
| |
|
|
|
|
|
|
|
|
|
The Company's recorded equity in earnings |
|
$ |
13,491 |
|
$ |
7,517 |
|
$ |
17,057 |
|
$ |
18,127 |
|
- (1)
- Certain
differences in the Company's recorded investment for one U.S. motion picture theatre where it has a 50% interest, and its proportional ownership
share resulting from the acquisition of the asset in a business combination where the investment was initially recorded at fair value, are amortized to equity in (earnings) or losses over the
estimated useful life of approximately 20 years for the underlying building. The recorded equity in earnings of NCM on common membership units owned immediately following the IPO of National
CineMedia, Inc. ("NCM, Inc.") (Tranche 1 Investment) does not include undistributed equity in earnings. The Company considered the excess distribution received following NCM, Inc.'s IPO as an
advance on NCM's future earnings. As a result, the Company will not recognize any undistributed equity in earnings of NCM on the original common membership units (Tranche 1 Investment) until
NCM's future net earnings equal the amount of the excess distribution.
The
Company recorded equity in earnings from NCM of $10,711,000 and $7,440,000 during the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively and
$23,145,000 and $20,706,000 during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. As of December 30, 2010, the Company owns 18,803,420 units,
or a 16.98% interest, in NCM accounted for following the equity method of accounting. The estimated fair market value of the units in NCM was approximately $375,504,000, based on the price per share
of NCM, Inc. on December 30, 2010 of $19.97 per share.
17
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 6—INVESTMENTS (Continued)
As
of December 30, 2010 and April 1, 2010, the Company has recorded $1,612,000 and $1,462,000 respectively, of amounts due from NCM related to on-screen
advertising revenue. As of December 30, 2010 and April 1, 2010, the Company had recorded $1,207,000 and $1,502,000 respectively, of amounts due to NCM related to the Exhibitor Services
Agreement. The Company recorded revenues for advertising from NCM of $5,658,000 and $5,121,000 during the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively and
$17,068,000 and $15,336,000 during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. The Company paid NCM advertising expenses related to beverage
advertising of $2,999,000 and $3,075,000 during the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively and $9,685,000 and $9,068,000 during the thirty-nine weeks
ended December 30, 2010 and December 31, 2009, respectively.
The
Company recorded the following changes in the carrying amount of its investment in NCM and equity in (earnings) losses of NCM during the thirty-nine weeks ended December 30,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Investment in
NCM(1) |
|
Deferred
Revenue(2) |
|
Cash
Received
(Paid) |
|
Equity in
(Earnings)
Losses |
|
Advertising
(Revenue) |
|
(Gain) on
NCM, Inc.
Stock Sale |
|
Beginning balance April 1, 2010 |
|
$ |
28,826 |
|
$ |
(252,322 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Receipt of Common Units(3) |
|
|
111,520 |
|
|
(111,520 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Exchange and sale of NCM stock(4) |
|
|
(37,576 |
) |
|
— |
|
|
102,224 |
|
|
— |
|
|
— |
|
|
(64,648 |
) |
Receipt of excess cash distributions and amounts under Tax Receivable Agreement |
|
|
(5,941 |
) |
|
— |
|
|
21,404 |
|
|
(15,463 |
) |
|
— |
|
|
— |
|
Amortization of deferred revenue |
|
|
— |
|
|
3,399 |
|
|
— |
|
|
— |
|
|
(3,399 |
) |
|
— |
|
Equity in earnings(5) |
|
|
7,682 |
|
|
— |
|
|
— |
|
|
(7,682 |
) |
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance December 30, 2010 |
|
$ |
104,511 |
|
$ |
(360,443 |
) |
$ |
123,628 |
|
$ |
(23,145 |
) |
$ |
(3,399 |
) |
$ |
(64,648 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Represents
AMC's investment in 694,164 common membership units originally valued at March 27, 2008 and 300,141 common membership units originally
valued at March 17, 2009, 94,015 common membership units originally valued at March 17, 2010, and 4,808,360 common membership units originally valued at June 14, 2010 received
under the Common Unit Adjustment Agreement dated as of February 13, 2007 (Tranche 2 Investments). AMC's investment in 12,906,740 common membership units (Tranche 1 Investment) is
carried at zero cost.
- (2)
- Represents
the unamortized portion of the Exhibitor Services Agreement (ESA) modifications payment received from NCM. Such amounts are being amortized to
revenues over the remainder of the 30 year term of the ESA ending in 2036, using a units-of-revenue method, as described in ASC 470-10-35 (formerly
EITF 88-18, Sales of Future Revenues).
- (3)
- Effective
June 14, 2010 and with a settlement date of June 28, 2010, the Company received 6,510,209 common membership units of NCM as a result
of an Extraordinary Common Unit Adjustment in connection with the Company's acquisition of Kerasotes. The Company recorded the additional units at a fair value of $111,520,000 based on a price per
shares of NCM, Inc. on June 14, 2010, of $17.13 per share, with an offsetting adjustment to deferred revenue.
18
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 6—INVESTMENTS (Continued)
- (4)
- All
of the Company's NCM membership units are redeemable for, at the option of NCM, cash or shares of common stock of NCM, Inc. on a share-for-share basis.
On August 18, 2010, the Company sold 6,500,000 shares of common stock of NCM, Inc. in an underwritten public offering for $16.00 per share and reduced the Company's related investment in
NCM by $36,709,000, the average carrying amount of the shares sold. Net proceeds received on this sale were $99,840,000 after deducting related underwriting fees and professional and consulting costs
of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, the Company sold 155,193 shares of NCM, Inc. to the underwriters to cover over-allotments
for $16.00 per share and reduced the Company's related investment in NCM by $867,000, the average carrying amount of the shares owned. Net proceeds received on this sale were $2,384,000 after
deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000.
- (5)
- Represents
equity in earnings on the Tranche 2 Investments only.
Differences in Accounting for Tranche 1 and Tranche 2 Investments in NCM
On February 13, 2007, NCM, Inc., the sole manager of NCM, closed its IPO and used the net proceeds from the IPO to purchase a
44.8% interest in NCM, paying NCM $746,100,000 and paying the Founding Members $78,500,000 for a portion of the NCM units owned by them. NCM then paid $686,300,000 of the funds received from NCM, Inc.
to the Founding Members as consideration for their agreement to modify the then-existing ESA. Also in connection with the IPO, NCM used $59,800,000 of the proceeds it received from NCM, Inc. and
$709,700,000 of net proceeds from its new senior secured credit facility entered into concurrently with the completion of the IPO to redeem $769,500,000 in NCM preferred units held by the Founding
Members. The redemption distribution to the Founding Members described above related to the IPO resulted in large Members' Deficit amounts for the Founding Members.
The
Company received approximately $259,300,000 for the redemption of all of its preferred units in NCM and approximately $26,500,000 from selling common units in NCM to NCM, Inc. In
addition, the Company received $231,300,000 as consideration for modifying the ESA.
Following
the IPO, the Company determined it would not recognize undistributed equity in the earnings on the original 17,474,890 NCM membership units (Tranche 1 Investment) until
NCM's future net earnings, less distributions received, surpass the amount of the excess distribution which created the Members' deficit in NCM. The Company considers the excess distribution described
above as an advance on NCM's future earnings and, accordingly, future earnings of NCM should not be recognized through the application of equity method accounting until such time as its share of NCM's
future earnings, net of distributions received, exceeds the excess distribution. The Company believes that the accounting model provided by ASC 323-10-35-22
for recognition of equity investee losses in excess of an investor's basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution. The Company's
Tranche 1 Investment recorded at $0 corresponds with a NCM Members' Deficit amount in its capital account.
19
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 6—INVESTMENTS (Continued)
The
Company has received 7,983,723 additional units in NCM subsequent to the IPO as a result of Common Unit Adjustments received from March 27, 2008 through June 14, 2010
(Tranche 2 Investments). The Company follows the guidance in ASC 323-10-35-29 (formerly EITF 02-18, Accounting for Subsequent Investments in an Investee after Suspension of Equity Loss
Recognition) by analogy, which also refers to AICPA Technical
Practice Aid 2220.14. Both sets of literature indicate that if a subsequent investment is made in an equity method investee that has experienced significant losses,
the investor must determine if the subsequent investment constitutes funding of prior losses. The Company concluded that the construction or acquisition of new theatres that has led to the Common Unit
adjustments included in its Tranche 2 Investments equates to making additional investments in NCM. The Company has evaluated the receipt of the additional common units in NCM and the assets
exchanged for these additional units and has determined that the right to use its incremental new screens would not be considered funding of prior losses. This determination was formed by considering
that (i) NCM does not receive any additional funds from the Tranche 2 Investments, (ii) both NCM and AMC record their respective increases to Members' Equity and Investment at the
same amount (fair value of the units issued), (iii) the additional investments result in additional ownership in NCM and (iv) the investments in additional common units are not
subordinate to the other equity of NCM. As such, the additional common units received would be accounted for as a Tranche 2 Investment separate from the Company's initial investment following
the equity method. The Company's Tranche 2 Investments correspond with the NCM Members' equity amounts in its capital account.
NOTE 7—FAIR VALUE MEASUREMENTS
Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the
entity transacts. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values.
The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:
|
|
|
|
| |
Level 1: |
|
Quoted market prices in active markets for identical assets or liabilities. |
|
Level 2: |
|
Observable market based inputs or unobservable inputs that are corroborated by market data. |
|
Level 3: |
|
Unobservable inputs that are not corroborated by market data. |
20
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 7—FAIR VALUE MEASUREMENTS (Continued)
The
following table summarizes the fair value hierarchy of the Company's financial assets and liabilities carried at fair value on a recurring basis as of December 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 30, 2010 Using |
|
(In thousands)
|
|
Total
Carrying
Value at
December 30,
2010 |
|
Quoted
prices in
active
market
(Level 1) |
|
Significant
other
observable
inputs
(Level 2) |
|
Significant
unobservable
inputs
(Level 3) |
|
Cash and equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Money Market Mutual Funds |
|
$ |
255,126 |
|
$ |
255,126 |
|
$ |
— |
|
$ |
— |
|
| |
Restricted short-term investments |
|
|
12,715 |
|
|
12,715 |
|
|
— |
|
|
— |
|
Other long-term assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity securities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
RealD Inc. Common Stock |
|
|
10,618 |
|
|
— |
|
|
10,618 |
|
|
— |
|
| |
|
Mutual Fund Large U.S. Equity |
|
|
2,489 |
|
|
2,489 |
|
|
— |
|
|
— |
|
| |
|
Mutual Fund Small/Mid U.S. Equity |
|
|
271 |
|
|
271 |
|
|
— |
|
|
— |
|
| |
|
Mutual Fund International |
|
|
114 |
|
|
114 |
|
|
— |
|
|
— |
|
| |
|
Mutual Fund Broad U.S. Equity |
|
|
27 |
|
|
27 |
|
|
— |
|
|
— |
|
| |
|
Mutual Fund Balance |
|
|
56 |
|
|
56 |
|
|
— |
|
|
— |
|
| |
|
Mutual Fund Fixed Income |
|
|
312 |
|
|
312 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
281,728 |
|
$ |
271,110 |
|
$ |
10,618 |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
Valuation Techniques. The Company's money market mutual funds are invested in funds that seek to preserve principal, are highly liquid,
and therefore
are recorded on the balance sheet at the principal amounts deposited, which equals fair value. The restricted short-term investments are liquid, overnight deposits which are held as collateral for the
Company's letters of credits, and are measured at fair value using principal amounts deposited plus any interest paid. The equity securities, available-for-sale, primarily consist of common stock and
mutual funds invested in equity, fixed income, and international funds and are measured at fair value using quoted market prices. The Company is restricted from selling its shares of RealD Inc. until
January 2011 when the related lock-up period expires. The unrecognized gain of the equity securities recorded in accumulated other comprehensive loss as of December 30, 2010 is
$4,533,000.
Investment in RealD Inc. Common Stock. Under its RealD Inc. motion picture license agreement, the Company received a ten-year option to
purchase
1,222,782 shares of RealD Inc. common stock at approximately $0.00667 per share. The stock options vest in 3 tranches upon the achievement of screen installation targets. During the
first quarter of fiscal 2011, the Company vested in the first tranche and received 407,594 shares of RealD Inc. common stock. The stock is accounted for as an equity security, available for
sale, and is recorded in the consolidated balance sheet in other
21
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 7—FAIR VALUE MEASUREMENTS (Continued)
long-term
assets with an offsetting entry recorded to other long-term liabilities. The deferred lease incentive recorded in other long-term liabilities of $6,519,000 will be amortized on a
straight-line basis over the remaining term of the license agreement, which is approximately 8.6 years, to reduce RealD license expense recorded in the statement of operations under operating
expense. Any fair value adjustments of RealD Inc. common stock will be recorded to other long-term assets with an offsetting entry to accumulated other comprehensive loss.
The
Company vested in an additional 407,594 shares of RealD Inc. options, which will be recorded in the fourth quarter of fiscal 2011, after achieving its second tranche of screen
installation targets. During January 2011, the Company recorded an increase in other long-term assets of $11,361,000, based on the fair value of RealD Inc. common stock at the date of vesting, with an
offsetting entry recorded to other long-term liabilities. The deferred lease incentive of $11,361,000 recorded in other long-term liabilities will be amortized on a straight-line basis over the
remaining term of the license agreement, which is approximately 9.7 years, to reduce RealD license expense recorded in the statement of operations under operating expense.
Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not
recognized in the
statement of financial position for which it is practicable to estimate that value. At December 30, 2010, the carrying amount of the Company's liabilities for corporate borrowings was
approximately $2,335,384,000 and the fair value was approximately $2,426,688,000. At April 1, 2010, the carrying amount of the corporate borrowings was approximately $1,832,854,000 and the fair
value was approximately $1,891,002,000. Quoted market prices were used to value publicly held corporate borrowings. The carrying value of cash and equivalents approximates fair value because of the
short duration of those instruments.
NOTE 8—INCOME TAXES
The difference between the effective tax rate on earnings from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows:
|
|
|
|
|
|
|
|
|
|
Thirty-nine Weeks Ended |
|
|
|
December 30,
2010 |
|
December 31,
2009 |
|
Income tax expense (benefit) at the federal statutory rate |
|
$ |
13,600 |
|
$ |
5,500 |
|
Effect of: |
|
|
|
|
|
|
|
State income taxes |
|
|
2,550 |
|
|
2,000 |
|
Permanent items |
|
|
(200 |
) |
|
(500 |
) |
Valuation allowance |
|
|
(13,400 |
) |
|
(7,000 |
) |
| |
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
2,550 |
|
$ |
— |
|
| |
|
|
|
|
|
Effective income tax rate |
|
|
6.6 |
% |
|
0.0 |
% |
| |
|
|
|
|
|
The
accounting for income taxes requires that deferred tax assets and liabilities be recognized, using enacted tax rates, for the tax effect of temporary differences between the
financial reporting and
22
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 8—INCOME TAXES (Continued)
tax
bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.
The
effective rate for the period ending December 30, 2010 was substantially less than the expected rate primarily due to the federal tax expense being fully offset by various
federal tax credits. The state tax provision was for the states that impose their income based taxes on a gross sales method or that impose a margin tax or that have suspended the use of net operating
loss carryforwards into the current tax year.
NOTE 9—EMPLOYEE BENEFIT PLANS
The Company sponsors frozen non-contributory qualified and non-qualified defined benefit pension plans generally covering all employees who, prior to the freeze, were age 21 or older and
had completed at least 1,000 hours of service in their first twelve months of employment, or in a calendar year ending thereafter, and who were not covered by a collective bargaining agreement.
The Company also offers eligible retirees the opportunity to participate in a health plan (medical and dental). Certain employees are eligible for subsidized postretirement medical benefits. The
eligibility for these benefits is based upon a participant's age and service as of January 1, 2009.
The
Company expects to make pension contributions of approximately $390,000 per quarter for a total of approximately $1,560,000 during fiscal 2011.
Net
periodic benefit cost recognized for the plans during the thirteen weeks ended December 30, 2010 and December 31, 2009 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Service cost |
|
$ |
45 |
|
$ |
45 |
|
$ |
38 |
|
$ |
53 |
|
| |
Interest cost |
|
|
1,152 |
|
|
1,101 |
|
|
319 |
|
|
324 |
|
| |
Expected return on plan assets |
|
|
(996 |
) |
|
(748 |
) |
|
— |
|
|
— |
|
| |
Amortization of gain |
|
|
(3 |
) |
|
(8 |
) |
|
— |
|
|
(70 |
) |
| |
Amortization of prior service credit |
|
|
— |
|
|
— |
|
|
(216 |
) |
|
(135 |
) |
| |
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
198 |
|
$ |
390 |
|
$ |
141 |
|
$ |
172 |
|
| |
|
|
|
|
|
|
|
|
|
23
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 9—EMPLOYEE BENEFIT PLANS (Continued)
Net
periodic benefit cost recognized for the plans during the thirty-nine weeks ended December 30, 2010 and December 31, 2009 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Service cost |
|
$ |
136 |
|
$ |
135 |
|
$ |
115 |
|
$ |
157 |
|
| |
Interest cost |
|
|
3,456 |
|
|
3,303 |
|
|
957 |
|
|
972 |
|
| |
Expected return on plan assets |
|
|
(2,988 |
) |
|
(2,243 |
) |
|
— |
|
|
— |
|
| |
Amortization of (gain) loss |
|
|
148 |
|
|
141 |
|
|
— |
|
|
(208 |
) |
| |
Amortization of prior service credit |
|
|
— |
|
|
— |
|
|
(649 |
) |
|
(407 |
) |
| |
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
752 |
|
$ |
1,336 |
|
$ |
423 |
|
$ |
514 |
|
| |
|
|
|
|
|
|
|
|
|
Effective
July 29, 2010, the Company was able to determine it will no longer be obligated to contribute to one of its union sponsored pension plans under a new union contract,
triggering a complete withdrawal from the plan. The Company recorded a liability and expense related to the complete withdrawal of approximately $2,661,000 in the second quarter of fiscal 2011.
The
Company sponsors a voluntary 401(k) savings plan covering certain employees age 21 or older and who are not covered by a collective bargaining agreement. The company currently
matches 50% of each eligible employee's elective contributions up to 6% of the employee's eligible compensation. Effective January 1, 2011, the Company will match 100% of each eligible
employee's elective contributions up to 3% and 50% of contributions up to 5% of the employee's eligible compensation.
24
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 10—CORPORATE BORROWINGS
A summary of the carrying value of corporate borrowings and capital and financing lease obligations is as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
December 30, 2010 |
|
April 1, 2010 |
|
Senior Secured Credit Facility—Term Loan due 2013 (1.75% as of December 30, 2010) |
|
$ |
142,528 |
|
$ |
622,375 |
|
Senior Secured Credit Facility—Term Loan due 2016 (3.50% as of December 30, 2010) |
|
|
476,597 |
|
|
— |
|
Senior Secured Credit Facility—Revolver |
|
|
— |
|
|
— |
|
8% Senior Subordinated Notes due 2014 |
|
|
299,357 |
|
|
299,227 |
|
11% Senior Subordinated Notes due 2016 |
|
|
229,902 |
|
|
325,000 |
|
8.75% Senior Fixed Rate Notes due 2019 |
|
|
587,000 |
|
|
586,252 |
|
9.75% Senior Subordinated Notes due 2020 |
|
|
600,000 |
|
|
— |
|
Capital and financing lease obligations, 9%–11.5% |
|
|
66,736 |
|
|
57,286 |
|
| |
|
|
|
|
|
|
|
|
2,402,120 |
|
|
1,890,140 |
|
Less: current maturities |
|
|
(240,052 |
) |
|
(10,463 |
) |
| |
|
|
|
|
|
|
|
$ |
2,162,068 |
|
$ |
1,879,677 |
|
| |
|
|
|
|
|
Notes Due 2020
On December 15, 2010, the Company completed the offering of $600,000,000 aggregate principal amount of its 9.75% Senior
Subordinated Notes due 2020 (the "Notes due 2020"). The Notes due 2020 mature on December 1, 2020, pursuant to an indenture dated as of December 15, 2010, among the Company, the
Guarantors named therein and U.S. Bank National Association, as trustee (the "Indenture"). The Indenture provides that the Notes due 2020 are general unsecured senior subordinated obligations of the
Company and are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by all of its existing and future domestic restricted subsidiaries that guarantee its
other indebtedness. The Company will pay interest on the Notes due 2020 at 9.75% per annum, semi-annually in arrears on June 1 and December 1, commencing on June 1, 2011. The
Company may redeem some or all of the Notes due 2020 at any time on or after December 1, 2015, at the redemption prices set forth in the Indenture. The Company may redeem the Notes on or after
December 1, 2018 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem up to 35% of
the aggregate principal amount of the Notes due 2020 using net proceeds from certain equity offerings completed prior to December 1, 2013.
Notes Due 2016
Concurrently with the Notes due 2020 offering, the Company launched a cash tender offer and consent solicitation for any and all of its
then outstanding $325,000,000 aggregate principal amount 11% Senior Subordinated Notes due 2016 (the "Notes due 2016") at a purchase price of $1,031 plus a $30 consent fee for each $1,000 of principal
amount of currently outstanding Notes due 2016 validly
25
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 10—CORPORATE BORROWINGS (Continued)
tendered
and accepted by the Company on or before the early tender date (the "Cash Tender Offer"). The Company used the net proceeds from the issuance of the Notes due 2020 to pay the consideration
for the Cash Tender Offer plus accrued and unpaid interest on $95,098,000 principal amount of Notes due 2016 validly tendered. The Company recorded a loss on extinguishment related to the Cash Tender
Offer of $7,631,000 in Other expense during the thirteen and thirty-nine weeks ended December 30, 2010, which included previously capitalized deferred financing fees of $1,681,000, a tender
offer and consent fee paid to the holders of $5,801,000 and other expenses of $149,000. The Company intends to redeem the remaining $229,902,000 aggregate principal amount outstanding Notes due 2016
at a price of $1,055 per $1,000 principal amount on or after February 1, 2011 in accordance with the terms of the indenture and have classified the Notes due 2016 as current maturities of
corporate borrowings.
Holdings Discount Notes Due 2014
Concurrently with the Notes due 2020 offering on December 15, 2010, Holdings launched a cash tender offer and consent
solicitation for any and all of its outstanding $240,795,000 aggregate principal amount (accreted value) of its 12% Senior Discount Notes due 2014 (the "Discount Notes due 2014") at a purchase price
of $797 plus a $30 consent fee for each $1,000 face amount (or $792.09 accreted value) of currently outstanding Discount Notes due 2014 validly tendered and accepted by Holdings. AMCE used cash on
hand to make a dividend payment of $185,034,000 on December 15, 2010 to its stockholder, Holdings, which was treated as a reduction of additional paid-in capital. Holdings used the
funds received from AMCE to pay the consideration for the Discount Notes due 2014 cash tender offer plus accrued and unpaid interest on $170,684,000 principal amount (accreted value) of the Discount
Notes due 2014 validly tendered. Holdings redeemed the remaining $70,111,000 (accreted value) outstanding Discount Notes due 2014 at a price of $823.77 per $1,000 face amount (or $792.09 accreted
value) on January 3, 2011, using funds from an additional dividend received from AMCE of $76,141,000.
Senior Secured Credit Facility
On December 15, 2010, the Company entered into a third amendment to its Senior Secured Credit Agreement dated as of
January 26, 2006 to, among other things: (i) extend the maturity of the term loans held by accepting lenders and to increase the interest rate with respect to such term loans,
(ii) replace the Company's existing revolving credit facility (with higher interest rates and a longer maturity than the existing revolving credit facility), and (iii) amend certain of
the existing covenants therein. The following are key terms of the amendment:
- •
- The term loan maturity was extended to December 15, 2016 (the "Term Loan due 2016") for the aggregate principal
amount of $476,597,000 held by lenders who consented to the amendment. The remaining aggregate term loan principal amount of $142,528,000 will mature on January 26, 2013 (the "Term Loan due
2013"). The current applicable margin for borrowings under the Term Loan due 2013 is 0.50% with respect to base rate borrowings and 1.50% with respect to LIBOR borrowings and the applicable margin for
borrowings under the Term Loan due 2016 is 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings. The Company will repay $374,088 of the Term Loan due 2013 quarterly
through
26
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 10—CORPORATE BORROWINGS (Continued)
September 30,
2012, with any remaining balance due on January 26, 2013 and repay $1,250,912 of the Term Loan due 2016 quarterly through September 30, 2016, with any remaining
balance due on December 15, 2016.
- •
- The new five-year revolving credit facility includes a borrowing capacity of $192,500,000 through December 15, 2015
and is available for letters of credit and for swingline borrowings on same-day notice. The current applicable margin for borrowings under the revolving credit facility is 2.00% with respect to base
rate borrowings and 3.00% with respect to LIBOR borrowings. The Company is required to pay an unused commitment fee to the lenders under the revolving credit facility in respect of the unutilized
commitments thereunder at a rate equal to 0.50% per annum. It will also pay customary letter of credit fees.
The
Company recorded a loss on the modification of the Senior Secured Credit Agreement of $3,413,000 in Other expense during the thirteen and thirty-nine weeks ended December 30,
2010, which included third party modification fees of $2,885,000, previously capitalized financing fees related to the revolving credit facility of $367,000, and other expenses of $161,000.
As
of December 30, 2010, the Company was in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2019, the Notes due 2014, the
Notes due 2016, and the Notes due 2020.
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial statements of
guarantors and issuers of guaranteed securities registered or being registered. Each of the subsidiary guarantors are 100% owned
by AMCE. The subsidiary guarantees of AMCE's Notes due 2014, Notes due 2016, Notes due 2019, and Notes due 2020 are full and unconditional and joint and several. There are significant restrictions on
the Company's ability to obtain funds from any of its subsidiaries through dividends, loans or advances. The Company and its subsidiary guarantor's investments in its consolidated subsidiaries are
presented under the equity method of accounting.
27
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirteen weeks ended December 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
— |
|
$ |
424,178 |
|
$ |
3,180 |
|
$ |
— |
|
$ |
427,358 |
|
| |
Concessions |
|
|
— |
|
|
158,891 |
|
|
1,147 |
|
|
— |
|
|
160,038 |
|
| |
Other theatre |
|
|
— |
|
|
15,086 |
|
|
385 |
|
|
— |
|
|
15,471 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues |
|
|
— |
|
|
598,155 |
|
|
4,712 |
|
|
— |
|
|
602,867 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
|
— |
|
|
222,231 |
|
|
1,411 |
|
|
— |
|
|
223,642 |
|
| |
Concession costs |
|
|
— |
|
|
19,517 |
|
|
243 |
|
|
— |
|
|
19,760 |
|
| |
Operating expense |
|
|
— |
|
|
172,978 |
|
|
1,692 |
|
|
— |
|
|
174,670 |
|
| |
Rent |
|
|
— |
|
|
117,588 |
|
|
2,498 |
|
|
— |
|
|
120,086 |
|
| |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs |
|
|
— |
|
|
2,196 |
|
|
— |
|
|
— |
|
|
2,196 |
|
| |
|
Management fee |
|
|
— |
|
|
1,250 |
|
|
— |
|
|
— |
|
|
1,250 |
|
| |
|
Other |
|
|
— |
|
|
10,147 |
|
|
45 |
|
|
— |
|
|
10,192 |
|
| |
Depreciation and amortization |
|
|
— |
|
|
55,871 |
|
|
66 |
|
|
— |
|
|
55,937 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
— |
|
|
601,778 |
|
|
5,955 |
|
|
— |
|
|
607,733 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating loss |
|
|
— |
|
|
(3,623 |
) |
|
(1,243 |
) |
|
— |
|
|
(4,866 |
) |
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity in net (earnings) loss of subsidiaries |
|
|
36,936 |
|
|
1,454 |
|
|
— |
|
|
(38,390 |
) |
|
— |
|
| |
Other expense |
|
|
367 |
|
|
8,467 |
|
|
— |
|
|
— |
|
|
8,834 |
|
| |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Corporate borrowings |
|
|
35,071 |
|
|
44,221 |
|
|
— |
|
|
(44,230 |
) |
|
35,062 |
|
| |
|
Capital and financing lease obligations |
|
|
— |
|
|
1,596 |
|
|
— |
|
|
— |
|
|
1,596 |
|
| |
Equity in (earnings) loss of non-consolidated entities |
|
|
(177 |
) |
|
(13,525 |
) |
|
211 |
|
|
— |
|
|
(13,491 |
) |
| |
Investment income |
|
|
(38,084 |
) |
|
(6,351 |
) |
|
— |
|
|
44,230 |
|
|
(205 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
34,113 |
|
|
35,862 |
|
|
211 |
|
|
(38,390 |
) |
|
31,796 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income taxes |
|
|
(34,113 |
) |
|
(39,485 |
) |
|
(1,454 |
) |
|
38,390 |
|
|
(36,662 |
) |
Income tax benefit |
|
|
(1,300 |
) |
|
(1,950 |
) |
|
— |
|
|
— |
|
|
(3,250 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
(32,813 |
) |
|
(37,535 |
) |
|
(1,454 |
) |
|
38,390 |
|
|
(33,412 |
) |
Earnings from discontinued operations, net of income taxes |
|
|
— |
|
|
599 |
|
|
— |
|
|
— |
|
|
599 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(32,813 |
) |
$ |
(36,936 |
) |
$ |
(1,454 |
) |
$ |
38,390 |
|
$ |
(32,813 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirty-nine weeks ended December 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
— |
|
$ |
1,325,071 |
|
$ |
9,456 |
|
$ |
— |
|
$ |
1,334,527 |
|
| |
Concessions |
|
|
— |
|
|
512,259 |
|
|
3,450 |
|
|
— |
|
|
515,709 |
|
| |
Other theatre |
|
|
— |
|
|
46,328 |
|
|
880 |
|
|
— |
|
|
47,208 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues |
|
|
— |
|
|
1,883,658 |
|
|
13,786 |
|
|
— |
|
|
1,897,444 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
|
— |
|
|
700,413 |
|
|
4,233 |
|
|
— |
|
|
704,646 |
|
| |
Concession costs |
|
|
— |
|
|
63,297 |
|
|
764 |
|
|
— |
|
|
64,061 |
|
| |
Operating expense |
|
|
— |
|
|
491,017 |
|
|
5,129 |
|
|
— |
|
|
496,146 |
|
| |
Rent |
|
|
— |
|
|
350,042 |
|
|
6,079 |
|
|
— |
|
|
356,121 |
|
| |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs |
|
|
— |
|
|
13,171 |
|
|
— |
|
|
— |
|
|
13,171 |
|
| |
|
Management fee |
|
|
— |
|
|
3,750 |
|
|
— |
|
|
— |
|
|
3,750 |
|
| |
|
Other |
|
|
— |
|
|
41,176 |
|
|
74 |
|
|
— |
|
|
41,250 |
|
| |
Depreciation and amortization |
|
|
— |
|
|
156,715 |
|
|
180 |
|
|
— |
|
|
156,895 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
— |
|
|
1,819,581 |
|
|
16,459 |
|
|
— |
|
|
1,836,040 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating income (loss) |
|
|
— |
|
|
64,077 |
|
|
(2,673 |
) |
|
— |
|
|
61,404 |
|
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity in net (earnings) loss of subsidiaries |
|
|
(28,576 |
) |
|
3,593 |
|
|
— |
|
|
24,983 |
|
|
— |
|
| |
Other expense (income) |
|
|
367 |
|
|
(1,218 |
) |
|
— |
|
|
— |
|
|
(851 |
) |
| |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Corporate borrowings |
|
|
100,832 |
|
|
128,263 |
|
|
— |
|
|
(128,283 |
) |
|
100,812 |
|
| |
|
Capital and financing lease obligations |
|
|
— |
|
|
4,604 |
|
|
— |
|
|
— |
|
|
4,604 |
|
| |
Equity in (earnings) loss of non-consolidated entities |
|
|
(473 |
) |
|
(17,504 |
) |
|
920 |
|
|
— |
|
|
(17,057 |
) |
| |
Gain on NCM, Inc. stock sale |
|
|
— |
|
|
(64,648 |
) |
|
— |
|
|
— |
|
|
(64,648 |
) |
| |
Investment income |
|
|
(109,967 |
) |
|
(18,625 |
) |
|
— |
|
|
128,283 |
|
|
(309 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total other expense (income) |
|
|
(37,817 |
) |
|
34,465 |
|
|
920 |
|
|
24,983 |
|
|
22,551 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income taxes |
|
|
37,817 |
|
|
29,612 |
|
|
(3,593 |
) |
|
(24,983 |
) |
|
38,853 |
|
Income tax provision |
|
|
940 |
|
|
1,610 |
|
|
— |
|
|
— |
|
|
2,550 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
36,877 |
|
|
28,002 |
|
|
(3,593 |
) |
|
(24,983 |
) |
|
36,303 |
|
Earnings from discontinued operations, net of income taxes |
|
|
— |
|
|
574 |
|
|
— |
|
|
— |
|
|
574 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
36,877 |
|
$ |
28,576 |
|
$ |
(3,593 |
) |
$ |
(24,983 |
) |
$ |
36,877 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirteen weeks ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
— |
|
$ |
440,733 |
|
$ |
3,687 |
|
$ |
— |
|
$ |
444,420 |
|
| |
Concessions |
|
|
— |
|
|
165,493 |
|
|
1,374 |
|
|
— |
|
|
166,867 |
|
| |
Other theatre |
|
|
— |
|
|
15,514 |
|
|
381 |
|
|
— |
|
|
15,895 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues |
|
|
— |
|
|
621,740 |
|
|
5,442 |
|
|
— |
|
|
627,182 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
|
— |
|
|
237,556 |
|
|
1,719 |
|
|
— |
|
|
239,275 |
|
| |
Concession costs |
|
|
— |
|
|
18,077 |
|
|
301 |
|
|
— |
|
|
18,378 |
|
| |
Operating expense |
|
|
— |
|
|
153,916 |
|
|
1,681 |
|
|
— |
|
|
155,597 |
|
| |
Rent |
|
|
— |
|
|
108,422 |
|
|
2,001 |
|
|
— |
|
|
110,423 |
|
| |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs |
|
|
— |
|
|
485 |
|
|
— |
|
|
— |
|
|
485 |
|
| |
|
Management fee |
|
|
— |
|
|
1,250 |
|
|
— |
|
|
— |
|
|
1,250 |
|
| |
|
Other |
|
|
— |
|
|
14,667 |
|
|
30 |
|
|
— |
|
|
14,697 |
|
| |
Depreciation and amortization |
|
|
— |
|
|
47,296 |
|
|
176 |
|
|
— |
|
|
47,472 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
— |
|
|
581,669 |
|
|
5,908 |
|
|
— |
|
|
587,577 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating income (loss) |
|
|
— |
|
|
40,071 |
|
|
(466 |
) |
|
— |
|
|
39,605 |
|
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity in net (earnings) loss of subsidiaries |
|
|
(12,722 |
) |
|
1,395 |
|
|
— |
|
|
11,327 |
|
|
— |
|
| |
Other income |
|
|
— |
|
|
(2,135 |
) |
|
— |
|
|
— |
|
|
(2,135 |
) |
| |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Corporate borrowings |
|
|
32,177 |
|
|
40,456 |
|
|
— |
|
|
(40,454 |
) |
|
32,179 |
|
| |
|
Capital and financing lease obligations |
|
|
— |
|
|
1,413 |
|
|
— |
|
|
— |
|
|
1,413 |
|
| |
Equity in (earnings) loss of non-consolidated entities |
|
|
(563 |
) |
|
(7,883 |
) |
|
929 |
|
|
— |
|
|
(7,517 |
) |
| |
Investment expense (income) |
|
|
(35,187 |
) |
|
(5,303 |
) |
|
— |
|
|
40,454 |
|
|
(36 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total other expense (income) |
|
|
(16,295 |
) |
|
27,943 |
|
|
929 |
|
|
11,327 |
|
|
23,904 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income taxes |
|
|
16,295 |
|
|
12,128 |
|
|
(1,395 |
) |
|
(11,327 |
) |
|
15,701 |
|
Income tax benefit |
|
|
— |
|
|
(50 |
) |
|
— |
|
|
— |
|
|
(50 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
16,295 |
|
|
12,178 |
|
|
(1,395 |
) |
|
(11,327 |
) |
|
15,751 |
|
Earnings from discontinued operations, net of income taxes |
|
|
— |
|
|
544 |
|
|
— |
|
|
— |
|
|
544 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
16,295 |
|
$ |
12,722 |
|
$ |
(1,395 |
) |
$ |
(11,327 |
) |
$ |
16,295 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
30
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirty-nine weeks ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
— |
|
$ |
1,271,335 |
|
$ |
9,810 |
|
$ |
— |
|
$ |
1,281,145 |
|
| |
Concessions |
|
|
— |
|
|
484,126 |
|
|
3,782 |
|
|
— |
|
|
487,908 |
|
| |
Other theatre |
|
|
— |
|
|
43,541 |
|
|
952 |
|
|
— |
|
|
44,493 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues |
|
|
— |
|
|
1,799,002 |
|
|
14,544 |
|
|
— |
|
|
1,813,546 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
|
— |
|
|
692,202 |
|
|
4,502 |
|
|
— |
|
|
696,704 |
|
| |
Concession costs |
|
|
— |
|
|
52,710 |
|
|
738 |
|
|
— |
|
|
53,448 |
|
| |
Operating expense |
|
|
— |
|
|
444,252 |
|
|
4,913 |
|
|
— |
|
|
449,165 |
|
| |
Rent |
|
|
— |
|
|
325,272 |
|
|
5,835 |
|
|
— |
|
|
331,107 |
|
| |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs |
|
|
— |
|
|
706 |
|
|
— |
|
|
— |
|
|
706 |
|
| |
|
Management fee |
|
|
— |
|
|
3,750 |
|
|
— |
|
|
— |
|
|
3,750 |
|
| |
|
Other |
|
|
— |
|
|
40,707 |
|
|
61 |
|
|
— |
|
|
40,768 |
|
| |
Depreciation and amortization |
|
|
— |
|
|
142,447 |
|
|
502 |
|
|
— |
|
|
142,949 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
— |
|
|
1,702,046 |
|
|
16,551 |
|
|
— |
|
|
1,718,597 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Operating income (loss) |
|
|
— |
|
|
96,956 |
|
|
(2,007 |
) |
|
— |
|
|
94,949 |
|
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity in net (earnings) loss of subsidiaries |
|
|
(7,096 |
) |
|
6,008 |
|
|
— |
|
|
1,088 |
|
|
— |
|
| |
Other income |
|
|
— |
|
|
(300 |
) |
|
— |
|
|
— |
|
|
(300 |
) |
| |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Corporate borrowings |
|
|
93,288 |
|
|
117,892 |
|
|
— |
|
|
(117,721 |
) |
|
93,459 |
|
| |
|
Capital and financing lease obligations |
|
|
— |
|
|
4,239 |
|
|
— |
|
|
— |
|
|
4,239 |
|
| |
Equity in (earnings) loss of non-consolidated entities |
|
|
(1,021 |
) |
|
(21,123 |
) |
|
4,017 |
|
|
— |
|
|
(18,127 |
) |
| |
Investment income |
|
|
(102,102 |
) |
|
(15,770 |
) |
|
(16 |
) |
|
117,721 |
|
|
(167 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Total other expense (income) |
|
|
(16,931 |
) |
|
90,946 |
|
|
4,001 |
|
|
1,088 |
|
|
79,104 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before income taxes |
|
|
16,931 |
|
|
6,010 |
|
|
(6,008 |
) |
|
(1,088 |
) |
|
15,845 |
|
Income tax provision |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations |
|
|
16,931 |
|
|
6,010 |
|
|
(6,008 |
) |
|
(1,088 |
) |
|
15,845 |
|
Earnings from discontinued operations, net of income taxes |
|
|
— |
|
|
1,086 |
|
|
— |
|
|
— |
|
|
1,086 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
16,931 |
|
$ |
7,096 |
|
$ |
(6,008 |
) |
$ |
(1,088 |
) |
$ |
16,931 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
31
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
As of December 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and equivalents |
|
$ |
— |
|
$ |
645,932 |
|
$ |
40,235 |
|
$ |
— |
|
$ |
686,167 |
|
| |
Receivables, net |
|
|
62 |
|
|
66,747 |
|
|
1,514 |
|
|
— |
|
|
68,323 |
|
| |
Other current assets |
|
|
— |
|
|
80,105 |
|
|
2,002 |
|
|
— |
|
|
82,107 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets |
|
|
62 |
|
|
792,784 |
|
|
43,751 |
|
|
— |
|
|
836,597 |
|
Investment in equity of subsidiaries |
|
|
(100,006 |
) |
|
104,951 |
|
|
— |
|
|
(4,945 |
) |
|
— |
|
Property, net |
|
|
— |
|
|
984,997 |
|
|
896 |
|
|
— |
|
|
985,893 |
|
Intangible assets, net |
|
|
— |
|
|
154,552 |
|
|
— |
|
|
— |
|
|
154,552 |
|
Intercompany advances |
|
|
3,016,240 |
|
|
(3,097,738 |
) |
|
81,498 |
|
|
— |
|
|
— |
|
Goodwill |
|
|
— |
|
|
1,913,906 |
|
|
— |
|
|
— |
|
|
1,913,906 |
|
Other long-term assets |
|
|
41,432 |
|
|
268,675 |
|
|
8,362 |
|
|
— |
|
|
318,469 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Total assets |
|
$ |
2,957,728 |
|
$ |
1,122,127 |
|
$ |
134,507 |
|
$ |
(4,945 |
) |
$ |
4,209,417 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholder's Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
— |
|
$ |
192,318 |
|
$ |
1,008 |
|
$ |
— |
|
$ |
193,326 |
|
Accrued expenses and other liabilities |
|
|
23,146 |
|
|
109,906 |
|
|
785 |
|
|
— |
|
|
133,837 |
|
Deferred revenues and income |
|
|
— |
|
|
165,090 |
|
|
463 |
|
|
— |
|
|
165,553 |
|
Current maturities of corporate borrowings and capital and financing lease obligations |
|
|
236,402 |
|
|
3,650 |
|
|
— |
|
|
— |
|
|
240,052 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current liabilities |
|
|
259,548 |
|
|
470,964 |
|
|
2,256 |
|
|
— |
|
|
732,768 |
|
Corporate borrowings |
|
|
2,098,982 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,098,982 |
|
Capital and financing lease obligations |
|
|
— |
|
|
63,086 |
|
|
— |
|
|
— |
|
|
63,086 |
|
Deferred revenues—for exhibitor services agreement |
|
|
— |
|
|
360,443 |
|
|
— |
|
|
— |
|
|
360,443 |
|
Other long-term liabilities |
|
|
— |
|
|
327,640 |
|
|
27,300 |
|
|
— |
|
|
354,940 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities |
|
|
2,358,530 |
|
|
1,222,133 |
|
|
29,556 |
|
|
— |
|
|
3,610,219 |
|
| |
|
Stockholder's equity (deficit) |
|
|
599,198 |
|
|
(100,006 |
) |
|
104,951 |
|
|
(4,945 |
) |
|
599,198 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities and stockholder's equity |
|
$ |
2,957,728 |
|
$ |
1,122,127 |
|
$ |
134,507 |
|
$ |
(4,945 |
) |
$ |
4,209,417 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
32
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
As of April 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and equivalents |
|
$ |
— |
|
$ |
455,242 |
|
$ |
40,101 |
|
$ |
— |
|
$ |
495,343 |
|
| |
Receivables, net |
|
|
13 |
|
|
24,448 |
|
|
1,084 |
|
|
— |
|
|
25,545 |
|
| |
Other current assets |
|
|
— |
|
|
71,467 |
|
|
1,845 |
|
|
— |
|
|
73,312 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets |
|
|
13 |
|
|
551,157 |
|
|
43,030 |
|
|
— |
|
|
594,200 |
|
Investment in equity of subsidiaries |
|
|
(161,239 |
) |
|
106,304 |
|
|
— |
|
|
54,935 |
|
|
— |
|
Property, net |
|
|
— |
|
|
862,651 |
|
|
881 |
|
|
— |
|
|
863,532 |
|
Intangible assets, net |
|
|
— |
|
|
148,432 |
|
|
— |
|
|
— |
|
|
148,432 |
|
Intercompany advances |
|
|
2,743,747 |
|
|
(2,825,700 |
) |
|
81,953 |
|
|
— |
|
|
— |
|
Goodwill |
|
|
— |
|
|
1,814,738 |
|
|
— |
|
|
— |
|
|
1,814,738 |
|
Other long-term assets |
|
|
33,367 |
|
|
189,428 |
|
|
9,480 |
|
|
— |
|
|
232,275 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total assets |
|
$ |
2,615,888 |
|
$ |
847,010 |
|
$ |
135,344 |
|
$ |
54,935 |
|
$ |
3,653,177 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholder's Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Accounts payable |
|
$ |
— |
|
$ |
174,251 |
|
$ |
891 |
|
$ |
— |
|
$ |
175,142 |
|
| |
Accrued expenses and other liabilities |
|
|
22,475 |
|
|
116,839 |
|
|
267 |
|
|
— |
|
|
139,581 |
|
| |
Deferred revenues and income |
|
|
— |
|
|
125,376 |
|
|
466 |
|
|
— |
|
|
125,842 |
|
| |
Current maturities of corporate borrowings and capital and financing lease obligations |
|
|
6,500 |
|
|
3,963 |
|
|
— |
|
|
— |
|
|
10,463 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total current liabilities |
|
|
28,975 |
|
|
420,429 |
|
|
1,624 |
|
|
— |
|
|
451,028 |
|
Corporate borrowings |
|
|
1,826,354 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,826,354 |
|
Capital and financing lease obligations |
|
|
— |
|
|
53,323 |
|
|
— |
|
|
— |
|
|
53,323 |
|
Deferred revenues for exhibitor services agreement |
|
|
— |
|
|
252,322 |
|
|
— |
|
|
— |
|
|
252,322 |
|
Other long-term liabilities |
|
|
— |
|
|
282,175 |
|
|
27,416 |
|
|
— |
|
|
309,591 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities |
|
|
1,855,329 |
|
|
1,008,249 |
|
|
29,040 |
|
|
— |
|
|
2,892,618 |
|
| |
|
Stockholder's equity (deficit) |
|
|
760,559 |
|
|
(161,239 |
) |
|
106,304 |
|
|
54,935 |
|
|
760,559 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities and stockholder's equity |
|
$ |
2,615,888 |
|
$ |
847,010 |
|
$ |
135,344 |
|
$ |
54,935 |
|
$ |
3,653,177 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
33
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirty-nine weeks ended December 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
26,211 |
|
$ |
88,545 |
|
$ |
55 |
|
$ |
— |
|
$ |
114,811 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
— |
|
|
(83,885 |
) |
|
(200 |
) |
|
— |
|
|
(84,085 |
) |
| |
Acquisition of Kerasotes, net of cash acquired |
|
|
— |
|
|
(280,606 |
) |
|
— |
|
|
— |
|
|
(280,606 |
) |
| |
Proceeds from NCM, Inc. stock sale |
|
|
— |
|
|
102,224 |
|
|
— |
|
|
— |
|
|
102,224 |
|
| |
Proceeds from disposition of Cinemex |
|
|
— |
|
|
1,845 |
|
|
— |
|
|
— |
|
|
1,845 |
|
| |
Proceeds from the disposition of long-term assets |
|
|
— |
|
|
58,391 |
|
|
— |
|
|
— |
|
|
58,391 |
|
| |
Other, net |
|
|
— |
|
|
3,682 |
|
|
200 |
|
|
— |
|
|
3,882 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
— |
|
|
(198,349 |
) |
|
— |
|
|
— |
|
|
(198,349 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Repurchase of Senior Subordinated Notes due 2016 |
|
|
(95,098 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(95,098 |
) |
| |
Payment of tender offer and consent solicitation consideration on Senior Subordinated Notes due 2016 |
|
|
(5,801 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(5,801 |
) |
| |
Proceeds from issuance of Senior Subordinated Notes due 2020 |
|
|
600,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
600,000 |
|
| |
Deferred financing costs |
|
|
(13,665 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(13,665 |
) |
| |
Principal payments under capital and financing lease obligations |
|
|
— |
|
|
(3,133 |
) |
|
— |
|
|
— |
|
|
(3,133 |
) |
| |
Principle payments under Term Loan B |
|
|
(3,250 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(3,250 |
) |
| |
Change in construction payables |
|
|
— |
|
|
(4,037 |
) |
|
— |
|
|
— |
|
|
(4,037 |
) |
| |
Dividends paid to Marquee Holdings Inc. |
|
|
(200,218 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(200,218 |
) |
| |
Change in intercompany advances |
|
|
(308,179 |
) |
|
307,724 |
|
|
455 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(26,211 |
) |
|
300,554 |
|
|
455 |
|
|
— |
|
|
274,798 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and equivalents |
|
|
— |
|
|
(60 |
) |
|
(376 |
) |
|
— |
|
|
(436 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and equivalents |
|
|
— |
|
|
190,690 |
|
|
134 |
|
|
— |
|
|
190,824 |
|
Cash and equivalents at beginning of period |
|
|
— |
|
|
455,242 |
|
|
40,101 |
|
|
— |
|
|
495,343 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of period |
|
$ |
— |
|
$ |
645,932 |
|
$ |
40,235 |
|
$ |
— |
|
$ |
686,167 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
34
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 11—CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
Thirty-nine weeks ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
AMCE |
|
Subsidiary
Guarantors |
|
Subsidiary
Non-Guarantors |
|
Consolidating
Adjustments |
|
Consolidated
AMC Entertainment Inc. |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
33,796 |
|
$ |
213,763 |
|
$ |
(1,179 |
) |
$ |
— |
|
$ |
246,380 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
— |
|
|
(59,328 |
) |
|
(154 |
) |
|
— |
|
|
(59,482 |
) |
| |
Proceeds from disposition of Cinemex |
|
|
— |
|
|
4,342 |
|
|
— |
|
|
— |
|
|
4,342 |
|
| |
Other, net |
|
|
— |
|
|
1,458 |
|
|
(6,000 |
) |
|
— |
|
|
(4,542 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
— |
|
|
(53,528 |
) |
|
(6,154 |
) |
|
— |
|
|
(59,682 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Repayment under revolving credit facility |
|
|
(185,000 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(185,000 |
) |
| |
Repurchase of Fixed Notes due 2012 |
|
|
(250,000 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(250,000 |
) |
| |
Proceeds from issuance of Senior Notes due 2019 |
|
|
585,492 |
|
|
— |
|
|
— |
|
|
— |
|
|
585,492 |
|
| |
Deferred financing costs |
|
|
(16,257 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(16,257 |
) |
| |
Principal payments under capital and financing lease obligations |
|
|
— |
|
|
(2,567 |
) |
|
— |
|
|
— |
|
|
(2,567 |
) |
| |
Principal payments on Term Loan B |
|
|
(4,875 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(4,875 |
) |
| |
Change in construction payables |
|
|
— |
|
|
722 |
|
|
— |
|
|
— |
|
|
722 |
|
| |
Dividends paid Marquee Holdings Inc. |
|
|
(315,351 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(315,351 |
) |
| |
Change in intercompany advances |
|
|
152,195 |
|
|
(155,229 |
) |
|
3,034 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(33,796 |
) |
|
(157,074 |
) |
|
3,034 |
|
|
— |
|
|
(187,836 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and equivalents |
|
|
— |
|
|
— |
|
|
(2,226 |
) |
|
— |
|
|
(2,226 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and equivalents |
|
|
— |
|
|
3,161 |
|
|
(6,525 |
) |
|
— |
|
|
(3,364 |
) |
Cash and equivalents at beginning of period |
|
|
— |
|
|
488,800 |
|
|
45,209 |
|
|
— |
|
|
534,009 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of period |
|
$ |
— |
|
$ |
491,961 |
|
$ |
38,684 |
|
$ |
— |
|
$ |
530,645 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
NOTE 12—COMMITMENTS AND CONTINGENCIES
The Company, in the normal course of business, is party to various legal actions. Except as described below, management believes that the potential exposure, if any, from such matters
would not have a material adverse effect on the financial condition, cash flows or results of operations of the Company.
United States of America v. AMC Entertainment Inc. and American Multi-Cinema, Inc. (No. 99 01034 FMC (SHx),
filed in the U.S. District Court for the Central District of California). On January 29, 1999, the Department of Justice (the "Department") filed suit alleging that the Company's stadium style
theatres violated the ADA and related regulations. The Department alleged the Company had failed to provide persons in wheelchairs seating arrangements with lines-of-sight comparable to the
35
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 12—COMMITMENTS AND CONTINGENCIES (Continued)
general
public. The Department alleged various non-line-of-sight violations as well. The Department sought declaratory and injunctive relief regarding existing and future theatres with stadium-style
seating, compensatory damages in the approximate amount of $75,000 and a civil penalty of $110,000.
As
to line-of-sight matters, the trial court entered summary judgment in favor of the Department as to both liability and as to the appropriate remedy. On December 5, 2008, the
Ninth Circuit Court of Appeals reversed the trial court as to the appropriate remedy and remanded the case back to the trial court for findings consistent with its decision. The Company and the
Department reached a settlement regarding the extent of betterments and remedies required for line-of-sight violations which the parties believe are consistent with the Ninth Circuit's decision. The
trial court approved the settlement on November 29, 2010. The betterments will be made over a 5 year term and the Company estimates the unpaid cost of such betterments to be
approximately $5,000,000. The Company has recorded a liability of $75,000 for compensation to claimants and fines related to this matter.
As
to the non-line-of-sight aspects of the case, on January 21, 2003, the trial court entered summary judgment in favor of the Department on matters such as parking areas,
signage, ramps, location of
toilets, counter heights, ramp slopes, companion seating and the location and size of handrails. On December 5, 2003, the trial court entered a consent order and final judgment on
non-line-of-sight issues under which the Company agreed to remedy certain violations at its stadium-style theatres and at certain theatres it may open in the future. Currently the Company estimates
that remaining betterments are required at approximately 45 stadium-style theatres. The Company estimates that the unpaid costs of these betterments will be approximately $16,700,000. The estimate is
based on actual costs incurred on remediation work completed to date. The actual costs of betterments may vary based on the results of surveys of the remaining theatres.
Michael Bateman v. American Multi-Cinema, Inc. (No. CV07-00171). In January 2007, a class action complaint was filed
against the Company in the Central District of the United States District Court of California (the "District Court") alleging violations of the Fair and Accurate Credit Transactions Act ("FACTA").
FACTA provides in part that neither expiration dates nor more than the last 5 numbers of a credit or debit card may be printed on receipts given to customers. FACTA imposes significant
penalties upon violators where the violation is deemed to have been willful. Otherwise damages are limited to actual losses incurred by the card holder. On October 24, 2008, the District Court
denied plaintiff's renewed motion for class certification. On September 27, 2010, the Ninth Circuit Court of Appeals vacated the District Court's order and remanded the proceedings for a new
determination consistent with their opinion. The Company filed its Petition for En Banc and/or Panel Rehearing on October 8, 2010. The parties have reached a tentative settlement, subject to
court approval, which is not expected to have a material adverse impact to the Company's financial condition.
On
May 14, 2009, Harout Jarchafjian filed a similar lawsuit alleging that the Company willfully violated FACTA and seeking statutory damages, but without alleging any actual
injury (Jarchafjian v. American Multi-Cinema, Inc. (C.D. Cal. Case No. CV09-03434). The Jarchafjian case has been deemed related to
the Bateman case and was stayed pending a Ninth Circuit decision in the Bateman case, which has now been issued. The parties have reached a tentative settlement, subject to court approval, which is
not expected to have a material adverse impact to the Company's financial condition.
36
Table of Contents
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 30, 2010
(Unaudited)
NOTE 12—COMMITMENTS AND CONTINGENCIES (Continued)
In
addition to the cases noted above, the Company is also currently a party to various ordinary course claims from vendors (including concession suppliers and motion picture
distributors), landlords and other legal proceedings. If management believes that a loss arising from these actions is probable and can reasonably be estimated, the Company records the amount of the
loss, or the minimum estimated liability when the loss is estimated using a range and no point is more probable than another. As additional information becomes available, any potential liability
related to these actions is assessed and the estimates are revised, if necessary. Except as described above, management believes that the ultimate outcome of such other matters, individually and in
the aggregate, will not have a material adverse effect on the Company's financial position or overall trends in results of operations. However, litigation and claims are subject to inherent
uncertainties and unfavorable outcomes could occur. An unfavorable outcome could include monetary damages. If an unfavorable outcome were to occur, there
exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.
NOTE 13—RELATED PARTY TRANSACTIONS
Amended and Restated Fee Agreement
In connection with the merger with LCE Holdings Inc., Holdings, AMCE and the Sponsors entered into an Amended and Restated Fee
Agreement, which provides for an annual management fee of $5,000,000, payable quarterly and in advance to each Sponsor, on a pro rata basis, until the earliest of (i) the twelfth anniversary
from December 23, 2004; (ii) such time as the sponsors own less than 20% in the aggregate of Parent; and (iii) such earlier time as Holdings, AMCE and the Requisite Stockholder
Majority agree. In addition, the fee agreement provided for reimbursements by AMCE to the Sponsors for their out-of-pocket expenses and to Holdings of up to $3,500,000 for fees payable by Holdings in
any single fiscal year in order to maintain AMCE's and its corporate existence, corporate overhead expenses and salaries or other compensation of certain employees. The Amended and Restated Fee
Agreement terminated on June 11, 2007, the date of the holdco merger, and was superseded by a substantially identical agreement entered into by AMC Entertainment Holdings, Inc.,
Holdings, AMCE, the Sponsors and Holdings' other stockholders.
Upon
the consummation of a change in control transaction or an initial public offering, each of the Sponsors will receive, in lieu of quarterly payments of the annual management fee, a
fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the fee agreement (assuming a twelve year
term from the date of the original fee agreement), calculated using the treasury rate having a final maturity date that is closest to the twelfth anniversary of the date of the original fee agreement
date. As of December 30, 2010, the Company estimates that this amount would be $26,127,000. The Company expects to record any lump sum payment to the Sponsors as a dividend.
The
fee agreement also provides that the Company will indemnify the Sponsors against all losses, claims, damages and liabilities arising in connection with the management services
provided by the Sponsors under the fee agreement.
37
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
In addition to historical information, this Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act." The
words "forecast," "estimate," "project," "intend," "expect," "should," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties, assumptions and other factors, including those discussed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations of AMC Entertainment Inc.," which may cause our actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the
following:
- •
- national, regional and local economic conditions that may affect the markets in which we or our joint venture investees
operate;
- •
- the levels of expenditures on entertainment in general and movie theatres in particular;
- •
- increased competition within movie exhibition or other competitive entertainment mediums;
- •
- technological changes and innovations, including alternative methods for delivering movies to consumers;
- •
- the popularity of major motion picture releases;
- •
- shifts in population and other demographics;
- •
- our ability to renew expiring contracts at favorable rates, or to replace them with new contracts that are comparably
favorable to us;
- •
- our ability to integrate Kerasotes Showplace Theatres, LLC ("Kerasotes") and achieve anticipated synergies with
minimal disruption to our business;
- •
- our need for, and ability to obtain, additional funding for acquisitions and operations;
- •
- risks and uncertainties relating to our significant indebtedness;
- •
- fluctuations in operating costs;
- •
- capital expenditure requirements;
- •
- changes in interest rates; and
- •
- changes in accounting principles, policies or guidelines.
This
list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may
arise from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty.
Readers
are urged to consider these factors carefully in evaluating the forward-looking statements. For further information about these and other risks and uncertainties, see
Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended April 1, 2010 and in this Quarterly Report on Form 10-Q.
All
subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
The forward-looking
38
Table of Contents
statements
included herein are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Significant Events
On December 15, 2010, we completed the offering of $600,000,000 aggregate principal amount of our 9.75% Senior Subordinated
Notes due 2020 (the "Notes due 2020"). Concurrently with the initial notes offering, we launched a cash tender offer and consent solicitation for any and all of our then outstanding $325,000,000
aggregate principal amount 11% Senior Subordinated Notes due 2016 ("Notes due 2016") at a purchase price of $1,031 plus a $30 consent fee for each $1,000 of principal amount of currently outstanding
Notes due 2016 validly tendered and accepted by us on or before the early tender date (the "Cash Tender Offer"). We used the net proceeds from the issuance of the Notes due 2020 to pay the
consideration for the Cash Tender Offer plus accrued and unpaid interest on $95,098,000 principal amount of Notes due 2016 validly tendered. We recorded a loss on extinguishment related to the Cash
Tender Offer of $7,631,000 in Other expense during the thirteen and thirty-nine weeks ended December 30, 2010, which included previously capitalized deferred financing fees of
$1,681,000, a tender offer and consent fee paid to the holders of $5,801,000 and other expenses of $149,000. We intend to redeem the remaining $229,902,000 aggregate principal amount outstanding Notes
due 2016 at a price of $1,055 per $1,000 principal amount on or after February 1, 2011 in accordance with the terms of the indenture and have classified the Notes due 2016 as current maturities
of corporate borrowings.
Concurrently
with the Notes due 2020 offering on December 15, 2010, Holdings launched a cash tender offer and consent solicitation for any and all of its outstanding $240,795,000
aggregate principal amount (accreted value) of its 12% Senior Discount Notes due 2014 ("Discount Notes due 2014") at a purchase price of $797 plus a $30 consent fee for each $1,000 face amount (or
$792.09 accreted value) of currently outstanding Discount Notes due 2014 validly tendered and accepted by Holdings. We used cash on hand to make a dividend payment of $185,034,000 on
December 15, 2010 to our stockholder, Holdings, which was treated as a reduction of additional paid-in capital. Holdings used the funds received from us to pay the consideration for
the Discount Notes due 2014 cash tender offer plus accrued and unpaid interest on $170,684,000 principal amount (accreted value) of the Discount Notes due 2014 validly tendered. Holdings redeemed the
remaining $70,111,000 (accreted value) outstanding Discount Notes due 2014 at a price of $823.77 per $1,000 face amount (or $792.09 accreted value) on January 3, 2011 using funds from an
additional dividend received from us of $76,141,000.
On
December 15, 2010, we entered into a third amendment to our Senior Secured Credit Agreement dated as of January 26, 2006 to, among other things: (i) extend the
maturity of the term loans held by accepting lenders of $476,597,000 aggregate principal amount of term loans from January 26, 2013 to December 15, 2016 and to increase the interest rate
with respect to such term loans, (ii) replace our existing revolving credit facility with a new five-year revolving credit facility (with higher interest rates and a longer maturity
than the existing revolving credit facility), and (iii) amend certain of our existing covenants therein. We recorded a loss on the modification of our Senior Secured Credit Agreement of
$3,413,000 in Other expense during the thirteen and thirty-nine weeks ended December 30, 2010, which included third party modification fees of $2,885,000, previously capitalized
deferred financing fees related to the revolving credit facility of $367,000, and other expenses of $161,000.
All
of our National CineMedia, LLC ("NCM") membership units are redeemable for, at the option of NCM, cash or shares of common stock of National CineMedia, Inc.
("NCM, Inc.") on a share-for-share basis. On August 18, 2010, we sold 6,500,000 shares of common stock of NCM, Inc., in an underwritten public offering for
$16.00 per share and reduced our related investment in NCM by
39
Table of Contents
$36,709,000,
the average carrying amount of the shares sold. Net proceeds received on this sale were $99,840,000, after deducting related underwriting fees and professional and consulting costs of
$4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, we sold 155,193 shares of NCM, Inc. to the underwriters to cover over allotments for $16.00 per
share and reduced our related investment in NCM by $867,000, the average carrying amount of the shares owned. Net proceeds received on this sale were $2,384,000, after deducting related underwriting
fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000.
On
May 24, 2010, we completed the acquisition of 92 theatres and 928 screens from Kerasotes Showplace Theatres, LLC ("Kerasotes"). Kerasotes operated 95 theatres and 972
screens in mid-sized, suburban and metropolitan markets, primarily in the Midwest. More than three quarters of the Kerasotes theatres feature stadium seating and almost 90 percent
have been built since 1994. The purchase price for the Kerasotes theatres, paid in cash at closing, was $276,798,000, net of cash acquired. In addition, we paid working capital and other purchase
price adjustments of $3,808,000 during the second quarter of fiscal 2011, based on the final closing date working capital and deferred revenue amounts as described in the Unit Purchase Agreement. The
acquisition of Kerasotes significantly increased our size. Accordingly, results of operations for the thirty-nine weeks ended December 30, 2010, which include thirty-one
weeks of operations of the theatres we acquired, are not comparable to our results for the thirty-nine weeks ended December 31, 2009. For additional information about the Kerasotes
acquisition, see Note 2—Acquisition to our Consolidated Financial Statements under Part I Item 1. of this Report on Form 10-Q.
Overview
We are one of the world's leading theatrical exhibition companies. As of December 30, 2010, we owned, operated or had interests
in 361 theatres and 5,203 screens, with 99%, or 5,148, of our screens in the U.S. and Canada and 1%, or 55, of our screens in China (Hong Kong), France and the United Kingdom.
During
the thirty-nine weeks ended December 30, 2010, we acquired 92 theatres with 928 screens from Kerasotes in the U.S. In connection with the acquisition of
Kerasotes, we divested of 11 theatres with 142 screens as required by the Antitrust Division of the United States Department of Justice and acquired two theatres with 26 screens that were received in
exchange for three of the divested theatres above with 43 screens. We also permanently closed 21 theatres with 142 screens in the U.S. and temporarily closed and reopened 41 screens at four theatres
in the U.S. as part of a remodeling project to allow for dine-in theatres at these locations. We opened one new managed theatre with 14 screens in the U.S. and acquired one theatre with 6
screens in the U.S. in the ordinary course of business.
Our
Theatrical Exhibition revenues and income are generated primarily from box office admissions and theatre concession sales. The balance of our revenues are generated from ancillary
sources, including on-screen advertising, rental of theatre auditoriums, fees and other revenues generated from the sale of gift cards and packaged tickets, on-line ticketing
fees and arcade games located in theatre lobbies.
Box
office admissions are our largest source of revenue. We predominantly license "first-run" motion pictures from distributors owned by major film production companies and
from independent distributors. We license films on a film-by-film and theatre-by-theatre basis. Film exhibition costs are accrued based on the
applicable admissions revenues and estimates of the final settlement pursuant to our film licenses. Licenses that we enter into typically state that rental fees are based on either aggregate terms
established prior to the opening of the picture or on a mutually agreed settlement upon the conclusion of the picture run. Under an aggregate terms formula, we pay the distributor a specified
percentage of box office gross or pay based on a scale of percentages tied to different
40
Table of Contents
amounts
of box office gross. The settlement process allows for negotiation based upon how a film actually performs.
Concessions
sales are our second largest source of revenue after box office admissions. Concessions items include popcorn, soft drinks, candy, hot dogs and other products. We negotiate
prices for our
concessions products and supplies directly with concessions vendors on a national or regional basis to obtain high volume discounts or bulk rates and marketing incentives.
Our
revenues are dependent upon the timing and popularity of motion picture releases by distributors. The most marketable motion pictures are usually released during the summer and the
year-end holiday seasons. Therefore, our business can be seasonal, with higher attendance and revenues generally occurring during the summer months and holiday seasons. Our results of
operations may vary significantly from quarter to quarter.
During
fiscal 2010, films licensed from our six largest distributors based on revenues accounted for approximately 84% of our U.S. and Canada admissions revenues. Our revenues
attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor's motion pictures in any given year.
During
the period from 1990 to 2009, the annual number of first-run motion pictures released by distributors in the United States ranged from a low of 370 in 1995 to a high
of 633 in 2008, according to Motion Picture Association of America 2009 MPAA Theatrical Market Statistics. The number of digital 3D films released annually increased to a high of 20 from a low of 0
during this same time period.
We
continually upgrade the quality of our theatre circuit by adding new screens through new builds (including expansions) and acquisitions and by disposing of older screens through
closures and sales. We are an industry leader in the development and operation of megaplex theatres, typically defined as a theatre having 14 or more screens and offering amenities to enhance the
movie-going experience, such as stadium seating providing unobstructed viewing, digital sound and enhanced seat design. We have increased our 3D screens by 446 to 810 screens and our IMAX screens by
29 to 107 screens since December 31, 2009; and as of December 30, 2010, approximately 15.6% of our screens were 3D screens and approximately 2.1% of our screens were IMAX screens.
41
Table of Contents
Operating Results
The following table sets forth our revenues, operating costs and expenses attributable to our theatrical exhibition operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
% Change |
|
December 30,
2010 |
|
December 31,
2009 |
|
% Change |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical exhibition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Admissions |
|
$ |
427,358 |
|
$ |
444,420 |
|
|
-3.8 |
% |
$ |
1,334,527 |
|
$ |
1,281,145 |
|
|
4.2 |
% |
| |
Concessions |
|
|
160,038 |
|
|
166,867 |
|
|
-4.1 |
% |
|
515,709 |
|
|
487,908 |
|
|
5.7 |
% |
| |
Other theatre |
|
|
15,471 |
|
|
15,895 |
|
|
-2.7 |
% |
|
47,208 |
|
|
44,493 |
|
|
6.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total revenues |
|
$ |
602,867 |
|
$ |
627,182 |
|
|
-3.9 |
% |
$ |
1,897,444 |
|
$ |
1,813,546 |
|
|
4.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theatrical exhibition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Film exhibition costs |
|
$ |
223,642 |
|
$ |
239,275 |
|
|
-6.5 |
% |
$ |
704,646 |
|
$ |
696,704 |
|
|
1.1 |
% |
| |
Concession costs |
|
|
19,760 |
|
|
18,378 |
|
|
7.5 |
% |
|
64,061 |
|
|
53,448 |
|
|
19.9 |
% |
| |
Operating expense |
|
|
174,670 |
|
|
155,597 |
|
|
12.3 |
% |
|
496,146 |
|
|
449,165 |
|
|
10.5 |
% |
| |
Rent |
|
|
120,086 |
|
|
110,423 |
|
|
8.8 |
% |
|
356,121 |
|
|
331,107 |
|
|
7.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
538,158 |
|
|
523,673 |
|
|
2.8 |
% |
|
1,620,974 |
|
|
1,530,424 |
|
|
5.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Merger, acquisition and transaction costs |
|
|
2,196 |
|
|
485 |
|
|
* |
% |
|
13,171 |
|
|
706 |
|
|
* |
% |
| |
Management Fee |
|
|
1,250 |
|
|
1,250 |
|
|
— |
% |
|
3,750 |
|
|
3,750 |
|
|
— |
% |
| |
Other |
|
|
10,192 |
|
|
14,697 |
|
|
-30.7 |
% |
|
41,250 |
|
|
40,768 |
|
|
1.2 |
% |
Depreciation and amortization |
|
|
55,937 |
|
|
47,472 |
|
|
17.8 |
% |
|
156,895 |
|
|
142,949 |
|
|
9.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating costs and expenses |
|
$ |
607,733 |
|
$ |
587,577 |
|
|
3.4 |
% |
$ |
1,836,040 |
|
$ |
1,718,597 |
|
|
6.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
- *
- Percentage
change in excess of 100%
42
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Operating Data—Continuing Operations (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
New theatre screens |
|
|
41 |
|
|
— |
|
|
55 |
|
|
6 |
|
| |
Screens acquired |
|
|
— |
|
|
— |
|
|
960 |
|
|
— |
|
| |
Screen dispositions |
|
|
142 |
|
|
46 |
|
|
325 |
|
|
90 |
|
| |
Average screens—continuing operations(1) |
|
|
5,169 |
|
|
4,462 |
|
|
5,080 |
|
|
4,501 |
|
| |
Number of screens operated |
|
|
|
|
|
|
|
|
5,203 |
|
|
4,528 |
|
| |
Number of theatres operated |
|
|
|
|
|
|
|
|
361 |
|
|
299 |
|
| |
Screens per theatre |
|
|
|
|
|
|
|
|
14.4 |
|
|
15.1 |
|
| |
Attendance (in thousands)—continuing operations(1) |
|
|
47,416 |
|
|
51,662 |
|
|
152,895 |
|
|
152,147 |
|
- (1)
- Includes
consolidated theatres only.
We
present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as earnings (loss) from continuing operations plus (i) income tax provisions,
(ii) interest expense and (iii) depreciation and amortization, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating
performance. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating
Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA
should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
(In thousands)
|
|
December 30,
2010 |
|
December 31,
2009 |
|
December 30,
2010 |
|
December 31,
2009 |
|
Earnings (loss) from continuing operations |
|
$ |
(33,412 |
) |
$ |
15,751 |
|
$ |
36,303 |
|
$ |
15,845 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income tax provision (benefit) |
|
|
(3,250 |
) |
|
(50 |
) |
|
2,550 |
|
|
— |
|
| |
Interest expense |
|
|
36,658 |
|
|
33,592 |
|
|
105,416 |
|
|
97,698 |
|
| |
Depreciation and amortization |
|
|
55,937 |
|
|
47,472 |
|
|
156,895 |
|
|
142,949 |
|
| |
Certain operating expenses(1) |
|
|
8,001 |
|
|
2,198 |
|
|
94 |
|
|
3,986 |
|
| |
Equity in earnings of non-consolidated entities |
|
|
(13,491 |
) |
|
(7,517 |
) |
|
(17,057 |
) |
|
(18,127 |
) |
| |
Gain on NCM, Inc. stock sale |
|
|
— |
|
|
— |
|
|
(64,648 |
) |
|
— |
|
| |
Investment income |
|
|
(205 |
) |
|
(36 |
) |
|
(309 |
) |
|
(167 |
) |
| |
Other expense(2) |
|
|
11,044 |
|
|
— |
|
|
11,044 |
|
|
11,276 |
|
| |
General and administrative expense—unallocated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Merger, acquisition and transaction costs |
|
|
2,196 |
|
|
485 |
|
|
13,171 |
|
|
706 |
|
| |
|
Management fee |
|
|
1,250 |
|
|
1,250 |
|
|
3,750 |
|
|
3,750 |
|
| |
|
Stock-based compensation expense |
|
|
156 |
|
|
410 |
|
|
1,020 |
|
|
1,248 |
|
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(3) |
|
$ |
64,884 |
|
$ |
93,555 |
|
$ |
248,229 |
|
$ |
259,164 |
|
| |
|
|
|
|
|
|
|
|
|
- (1)
- Amounts
represent preopening expense, theatre and other closure expense, deferred digital equipment rent expense, and disposition of assets and other gains
included in operating expenses.
43
Table of Contents
- (2)
- Other
expense for fiscal 2011 is comprised of the loss on extinguishment of indebtedness related to the redemption of our 11% Senior Subordinated Notes due
2016 of $7,631,000 and expense related to the modification of the Senior Secured Credit Facility of $3,413,000. Other expense for fiscal 2010 is comprised of the loss on extinguishment of indebtedness
related to the redemption of our 85/8% Senior Notes due 2012.
- (3)
- The
acquisition of Kerasotes contributed approximately $9,000,000 and $26,600,000 in Adjusted EBITDA during the thirteen and thirty-nine weeks
ended December 30, 2010, respectively.
Adjusted
EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net earnings (loss) as an indicator of
operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies. We have included Adjusted EBITDA because we believe it provides management and investors with additional information to measure our performance
and liquidity, estimate our value and evaluate our ability to service debt. In addition, we use Adjusted EBITDA for incentive compensation purposes.
Adjusted
EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under
U.S. GAAP. For example, Adjusted EBITDA:
- •
- does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
- •
- does not reflect changes in, or cash requirements for, our working capital needs;
- •
- does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal
payments, on our debt;
- •
- excludes tax payments that represent a reduction in cash available to us;
- •
- does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the
future; and
- •
- does not reflect management fees that may be paid to our sponsors.
Thirteen Weeks Ended December 30, 2010 and December 31, 2009
Revenues. Total revenues decreased 3.9%, or $24,315,000, during the thirteen weeks ended December 30, 2010 compared to the
thirteen weeks
ended December 31, 2009. Total revenues included approximately $65,000,000 of additional revenues resulting from the acquisition of Kerasotes. Admissions revenues decreased 3.8%, or
$17,062,000, during the thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended December 31, 2009, due to an 8.2% decrease in attendance, partially offset by a 4.8%
increase in average ticket prices. The total admission revenues included the additional attendance and admissions revenues of approximately $43,200,000 resulting from the acquisition of Kerasotes. The
increase in average ticket price was primarily due to an increase in attendance from 3D film product for which we are able to charge more per ticket than for a standard 2D film. Admissions revenues at
comparable theatres (theatres opened on or before the third quarter of fiscal 2010) decreased 12.2%, or $52,957,000, during the thirteen weeks ended December 30, 2010 from the comparable period
last year, due to decreases in attendance, partially offset by increases in average ticket prices. Attendance decreased primarily due to a year-over-year change in the
popularity of film product, which was more favorable in the prior year period. Concessions revenues decreased 4.1%, or $6,829,000, during the thirteen weeks ended December 30, 2010 compared to
the thirteen weeks ended December 31, 2009, due to the decrease in attendance, partially offset by a 4.6% increase in average concessions per patron. The increase in concessions per patron
includes the impact
44
Table of Contents
of
concession price and size increases placed in effect during the thirteen weeks ended December 31, 2009 and thirteen weeks ended December 30, 2010, and a shift in product mix to higher
priced items. Concession revenues included approximately $20,700,000 of additional concession revenues resulting from the acquisition of Kerasotes. Other theatre revenues decreased 2.7%, or $424,000,
during the thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended December 31, 2009, primarily due to decreases in miscellaneous revenues and ticket fee revenues.
Other theatre revenues included approximately $1,100,000 of additional revenues resulting from the acquisition of Kerasotes.
Operating Costs and Expenses. Operating costs and expenses increased 3.4%, or $20,156,000, during the
thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended December 31, 2009. The effect of the acquisition of Kerasotes was an increase in operating costs and expenses
of approximately $68,900,000. Film exhibition costs decreased 6.5%, or $15,633,000, during the thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended December 31,
2009 due to the decrease in admissions revenues and decrease in film exhibition costs as a percentage of admissions revenues. As a percentage of admissions revenues, film exhibition costs were 52.3%
in the current period and 53.8% in the prior year period. Concession costs increased 7.5%, or $1,382,000, during the thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended
December 31, 2009 due to an increase in concession costs as a percentage of concession revenues, partially offset by the decrease in concession revenues. As a percentage of concessions
revenues, concession costs were 12.3% in the current period compared with 11.0% in the prior period, primarily due to the concession price and size increases, a shift in product mix from higher to
lower margin items, and concession offers targeting attendance growth. As a percentage of revenues, operating expense was 29.0% in the current period as compared to 24.8% in the prior period. Rent
expense increased 8.8%, or $9,663,000, during the thirteen weeks ended December 30, 2010 compared to the thirteen weeks ended December 31, 2009, primarily due to increased rent as a
result of the acquisition of Kerasotes of approximately $12,700,000.
We
continually monitor the performance of our theatres, and factors such as changing consumer preferences for filmed entertainment and our inability to sublease or utilize vacant space
could negatively impact operating results and result in future screen closures, abandonments, sales, dispositions and significant theatre and other closure charges prior to expiration of underlying
lease agreements.
General and Administrative Expense:
Merger, Acquisition and Transaction Costs. Merger, acquisition and transaction costs increased $1,711,000 during the thirteen weeks
ended
December 30, 2010 compared to the thirteen weeks ended December 31, 2009. Current year costs primarily consist of costs related to the acquisition of Kerasotes.
Management Fees. Management fees were unchanged during the thirteen weeks ended December 30, 2010. Management fees of $1,250,000
are paid
quarterly, in advance, to our Sponsors in exchange for consulting and other services.
Other. Other general and administrative expense decreased 30.7%, or $4,505,000, during the thirteen weeks ended December 30, 2010
compared to
the thirteen weeks ended December 31, 2009 due primarily to decreases in annual incentive compensation expense related to declines in operating performance, partially offset by increases in
salaries expense.
Depreciation and Amortization. Depreciation and amortization increased 17.8%, or $8,465,000, compared to the prior period. Increases in
depreciation
and amortization expense during the thirteen weeks ended December 30, 2010 are the result of increased net book value of theatre assets primarily due to the acquisition of Kerasotes, which
contributed $10,300,000 of depreciation expense, partially offset by decreases in the declining net book value of legacy theatre assets.
45
Table of Contents
Other Expense (Income). Other expense (income) includes $(2,201,000) and $(2,079,000) of income related to the derecognition of gift
card
liabilities, as to which we believe future redemption to be remote, during the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively. Other expense (income) includes
a loss on extinguishment of indebtedness related to the redemption of our 11% Senior Subordinated Notes due 2016 of $7,631,000 and expenses related to the modification of our Senior Secured Credit
Facility Term Loan due 2013 of $3,046,000 and Senior Secured Credit Facility Revolver of $367,000.
Interest Expense. Interest expense increased 9.1%, or $3,066,000, during the thirteen weeks ended December 30, 2010 compared to
the thirteen
weeks ended December 31, 2009, primarily due to an increase in interest expense related to the issuance of our 9.75% Senior Subordinated Notes due 2020 (the "Notes due 2020") on
December 15, 2010.
Equity in Earnings of Non-Consolidated Entities. Equity in earnings of non-consolidated entities was $13,491,000 in the
current period compared to $7,517,000 in the prior period. Equity in earnings related to our investment in National CineMedia, LLC were
$10,711,000 and $7,440,000 for the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively. Equity in earnings (losses) related to our investment in Digital Cinema
Implementation Partners, LLC ("DCIP") were $3,225,000 and $(368,000) for the thirteen weeks ended December 30, 2010 and December 31, 2009, respectively.
Investment Income. Investment income was $205,000 for the thirteen weeks ended December 30, 2010 compared to $36,000 for the
thirteen weeks
ended December 31, 2009.
Income Tax Benefit. The income tax benefit from continuing operations was $3,250,000 for the thirteen weeks ended December 30,
2010 and
$50,000 for the thirteen weeks ended December 31, 2009. See Note 8—Income Taxes for further information.
Earnings from Discontinued Operations, Net. On December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493
screens. The
results of operations of the Cinemex theatres have been classified as discontinued operations for all periods presented.
Net Earnings (Loss). Net earnings (loss) were $(32,813,000) and $16,295,000 for the thirteen weeks ended December 30, 2010 and
December 31, 2009, respectively. Net loss during the thirteen weeks ended December 30, 2010 was negatively impacted by the decrease in attendance and loss on extinguishment and
modification of indebtedness of $11,044,000. Net earnings were favorably impacted by the increase in attendance during the thirteen weeks ended December 31, 2009.
Thirty-nine Weeks Ended December 30, 2010 and December 31, 2009
Revenues. Total revenues increased 4.6%, or $83,898,000, during the thirty-nine weeks ended December 30, 2010 compared to the
thirty-nine weeks ended December 31, 2009. This increase included approximately $168,300,000 of additional revenues resulting from the acquisition of Kerasotes. Admissions revenues
increased 4.2%, or $53,382,000, during the thirty-nine weeks ended December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009, due to a 3.7%
increase in average ticket prices and a 0.5% increase in attendance. The increase in attendance and increase in admissions revenues includes the increased attendance and admissions revenues of
approximately $111,000,000 from Kerasotes. The increase in average ticket price was primarily due to an increase in attendance from 3D film product for which we are able to charge more per ticket than
for a standard 2D film. Admissions revenues at comparable theatres (theatres opened on or before the first quarter of fiscal 2010) decreased 3.1%, or $38,685,000, during the thirty-nine
weeks ended December 30, 2010 from the comparable period last year. Attendance was negatively impacted by less favorable film product during the thirty-nine weeks ended
December 30, 2010 as compared to the thirty-nine weeks ended
46
Table of Contents
December 31,
2009. Concessions revenues increased 5.7%, or $27,801,000, during the thirty-nine weeks ended December 30, 2010 compared to the thirty-nine weeks
ended December 31, 2009, due to a 5.0% increase in average concessions per patron and the increase in attendance, which was primarily due to the acquisition of Kerasotes. The increase in
concession revenues includes approximately $54,600,000 from Kerasotes. The increase in concessions per patron includes the impact of concession price and size increases placed in effect during the
third quarter of fiscal 2010 and the second and third quarters of fiscal 2011, and a shift in product mix to higher priced items. Other theatre revenues increased 6.1%, or $2,715,000, during the
thirty-nine weeks ended December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009, primarily due to increases in advertising revenues, package
ticket sales, and theatre rentals. The increase in other theatre revenues includes $2,700,000 from Kerasotes.
Operating Costs and Expenses. Operating costs and expenses increased 6.8%, or $117,443,000, during the thirty-nine weeks ended
December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009. The effect of the acquisition of Kerasotes was an increase in operating costs and expenses of
approximately $174,900,000. Film exhibition costs increased 1.1%, or $7,942,000, during the thirty-nine weeks ended December 30, 2010 compared to the thirty-nine weeks
ended December 31, 2009 due to the increase in admissions revenues, partially offset by the decrease in film exhibition costs as a percentage of admissions revenues. As a percentage of
admissions revenues, film exhibition costs were 52.8% in the current period and 54.4% in the prior year period. Concession costs increased 19.9%, or $10,613,000, during the thirty-nine
weeks ended December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009 due to an increase in concession costs as a percentage of concession revenues and the
increase in concession revenues. As a percentage of concessions revenues, concession costs were 12.4% in the current period compared with 11.0% in the prior period, primarily due to the concession
price and size increases, a shift in product mix from higher to lower margin items, and concession offers targeting attendance growth. As a percentage of revenues, operating expense was 26.1% in the
current period as compared to 24.8% in the prior period. Gains were recorded on disposition of assets during the thirty-nine weeks ended
December 30, 2010 which reduced operating expenses by approximately $10,293,000, primarily due to the sale of a divested legacy AMC theatre in conjunction with the acquisition of Kerasotes.
Rent expense increased 7.6%, or $25,014,000, during the thirty-nine weeks ended December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009,
primarily due to increased rent as a result of the acquisition of Kerasotes of approximately $30,400,000.
We
continually monitor the performance of our theatres, and factors such as changing consumer preferences for filmed entertainment and our inability to sublease or utilize vacant space
could negatively impact operating results and result in future screen closures, abandonments, sales, dispositions and significant theatre and other closure charges prior to expiration of underlying
lease agreements.
General and Administrative Expense:
Merger, Acquisition and Transaction Costs. Merger, acquisition and transaction costs increased $12,465,000 during the thirty-nine weeks
ended December 30, 2010 compared to the thirty-nine weeks ended December 31, 2009. Current year costs primarily consist of costs related to the acquisition of Kerasotes.
Management Fees. Management fees were unchanged during the thirty-nine weeks ended December 30, 2010. Management fees of
$1,250,000 are paid quarterly, in advance, to our Sponsors in exchange for consulting and other services.
Other. Other general and administrative expense increased 1.2%, or $482,000, during the thirty-nine weeks ended December 30, 2010
compared to the thirty-nine weeks ended December 31, 2009 primarily due to increases in salaries expense and estimated expense related to our complete
47
Table of Contents
withdrawal
from a union-sponsored pension plan of $2,661,000, partially offset by decreases in incentive compensation expense related to declines in operating performance. During the
thirty-nine weeks ended December 31, 2009, we recorded $1,400,000 of expense related to a complete withdrawal from a union-sponsored pension plan.
Depreciation and Amortization. Depreciation and amortization increased 9.8%, or $13,946,000, compared to the prior period. Increases in
depreciation
and amortization expense during the thirty-nine weeks ended December 30, 2010 are the result of increased net book value of theatre assets primarily due to the acquisition of
Kerasotes, which contributed $20,500,000 of depreciation expense, partially offset by decreases in the declining net book value of legacy theatre assets.
Other Expense (Income). Other expense (income) includes $(11,754,000) and $(11,501,000) of income related to the derecognition of gift
card
liabilities, as to which we believe future redemption to be remote, during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. Other expense
(income) includes a loss on extinguishment of indebtedness related to the redemption of our 11% Senior Subordinated Notes due 2016 of $7,631,000 and expense related to the modification of our Senior
Secured Credit Facility Term Loan due 2013 of $3,046,000, and Senior Secured Credit Facility Revolver of $367,000. Other expense (income) includes a loss of $11,276,000 related to the redemption of
our 85/8% Senior Notes due 2012 during the thirty-nine weeks ended December 31, 2009.
Interest Expense. Interest expense increased 7.9%, or $7,718,000, primarily due to an increase in interest expense related to the
issuance of our
8.75% Senior Notes due 2019 (the "Notes due 2019") on June 9, 2009 and our 9.75% Senior Subordinated Notes due 2020 (the "Notes due 2020") on December 15, 2010.
Equity in Earnings of Non-Consolidated Entities. Equity in earnings of non-consolidated entities was $17,057,000 in the
current period compared to $18,127,000 in the prior period. Equity in earnings related to our investment in National CineMedia, LLC were $23,145,000 and $20,706,000 for the
thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. Equity in losses related to our investment in Digital Cinema Implementation
Partners, LLC ("DCIP") were $5,356,000 and $2,237,000 for the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively.
Gain on NCM, Inc. Stock Sale. The gain on NCM, Inc. shares of common stock sold during the thirty-nine weeks ended
December 30, 2010 was $64,648,000. See Note 6—Investments for further information.
Investment Income. Investment income was $309,000 for the thirty-nine weeks ended December 30, 2010 compared to $167,000 for the
thirty-nine weeks ended December 31, 2009.
Income Tax Provision. The income tax provision from continuing operations was $2,550,000 for the thirty-nine weeks ended
December 30, 2010 and $0 for the thirty-nine weeks ended December 31, 2009. See Note 8—Income Taxes for further information.
Earnings from Discontinued Operations, Net. On December 29, 2008, we sold our operations in Mexico, including 44 theatres and 493
screens. The
results of operations of the Cinemex theatres have been classified as discontinued operations for all periods presented.
Net Earnings. Net earnings were $36,877,000 and $16,931,000 for the thirty-nine weeks ended December 30, 2010 and
December 31, 2009, respectively. Net earnings during the thirty-nine weeks ended December 30, 2010 were positively impacted by a gain on sale of NCM, Inc. shares of
$64,648,000 and a gain on disposition of assets of approximately $10,293,000, and negatively impacted by merger and acquisition costs of approximately $13,171,000 primarily due to the acquisition of
48
Table of Contents
Kerasotes,
loss on extinguishment and modification of indebtedness of $11,044,000 and increased interest expense of $7,718,000. Net earnings during the thirty-nine weeks ended
December 31, 2009 were negatively impacted by an expense of $11,276,000 related to the redemption of our 85/8% Senior Notes due 2012.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated revenues are primarily collected in cash, principally through box office admissions and theatre concessions sales. We
have an operating "float" which partially finances our operations and which generally permits us to maintain a smaller amount of working capital capacity. This float exists because admissions revenues
are received in cash, while exhibition costs (primarily film rentals) are ordinarily paid to distributors from 20 to 45 days following receipt of box office admissions revenues. Film
distributors generally release the films which they anticipate will be the most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during such
periods.
We
believe that cash generated from operations and existing cash and equivalents will be sufficient to fund operations and planned capital expenditures for at least the next
12 months and enable us to maintain compliance with covenants related to the Senior Secured Credit Facility and our 8% Senior Subordinated Notes due 2014 (the "Notes due 2014"), Notes due 2016,
8.75% Senior Notes due 2019 (the "Notes due 2019"), and Notes due 2020.
Cash Flows provided by Operating Activities
Cash flows provided by operating activities, as reflected in the Consolidated Statements of Cash Flows, were $114,811,000 and
$246,380,000 during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. The
decrease in cash flows provided by operating activities for the thirty-nine weeks ended December 30, 2010 was primarily due to an increase in payments on accounts payables and
accrued expenses and other liabilities, including payments of amounts acquired in the Kerasotes acquisition as well as payments made for merger, acquisition and transaction costs in connection with
the Kerasotes acquisition. Cash flows during the thirty-nine weeks ended December 30, 2010 include third party modification fees of $2,885,000 related to the modification of our
Senior Secured Credit Agreement, which reduced our cash flows from operating activities. Cash flows during the thirty-nine weeks ended December 31, 2009 include consent fee payments
of $7,399,000 related to the redemption of our 85/8% Senior Notes due 2012, which reduced our cash flows from operating activities. We had working capital surplus as of
December 30, 2010 and April 1, 2010 of $103,829,000 and $143,172,000, respectively. Working capital includes $165,553,000 and $125,842,000 of deferred revenues as of December 30,
2010 and April 1, 2010, respectively. We have the ability to borrow against our credit facility to meet obligations as they come due (subject to limitations on the incurrence of indebtedness in
our various debt instruments) and could incur indebtedness of $192,500,000 on our Credit Facility to meet these obligations as of December 30, 2010.
Cash Flows used in Investing Activities
Cash flows used in investing activities, as reflected in the Consolidated Statements of Cash Flows, were $198,349,000 and $59,682,000,
during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. Cash outflows from investing activities include capital expenditures of $84,085,000
and $59,482,000 during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively. Our capital expenditures primarily consisted of maintaining our
theatre circuit, technology upgrades, strategic initiatives and remodels. We expect that our gross capital expenditures cash outflows will be approximately $140,000,000 to $150,000,000 for fiscal
2011.
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Table of Contents
During
the thirty-nine weeks ended December 30, 2010, we paid $280,606,000 for the purchase of Kerasotes theatres at closing, net of cash acquired. The purchase
included working capital and other purchase price adjustments as described in the Unit Purchase Agreement.
During
the thirty-nine weeks ended December 30, 2010, we received net proceeds of $102,224,000 from the sale of 6,655,193 shares of common stock of NCM, Inc.
for $16.00 per share and reduced our related investment in NCM by $37,576,000, the average carrying amount of the shares sold.
We
received $57,400,000 in cash proceeds from the sale of certain theatres required to be divested in connection with the Kerasotes acquisition during the thirty-nine weeks
ended December 30, 2010 and received $991,000 for the sale of real estate acquired from Kerasotes.
We
fund the costs of constructing new theatres using existing cash balances; cash generated from operations or borrowed funds, as necessary. We generally lease our theatres pursuant to
long-term non-cancelable operating leases which may require the developer, who owns the property, to reimburse us for the construction costs. We may decide to own the real
estate assets of new theatres and, following construction, sell and leaseback the real estate assets pursuant to long-term non-cancelable operating leases.
Cash Flows provided by (used in) Financing Activities
Cash flows provided by (used in) financing activities, as reflected in the Consolidated Statement of Cash Flows, were $274,798,000 and
$(187,836,000) during the thirty-nine weeks ended December 30, 2010 and December 31, 2009, respectively.
During
the thirty-nine weeks ended December 30, 2010 and December 31, 2009, we made dividend payments of $200,218,000 and $315,351,000 to our stockholder,
Holdings, and Holdings made dividend payments to its stockholder, Parent, totaling $669,000 and $300,723,000, respectively, which was treated as a reduction of additional paid-in capital.
Proceeds
from the issuance of the 9.75% Senior Subordinated Notes due 2020 were $600,000,000 and deferred financing costs paid related to the issuance of the 9.75% Senior Notes due 2020
were $11,964,000 during the thirty-nine weeks ended December 30, 2010. In addition, deferred financing costs paid related to the Senior Secured Credit Facility were $1,701,000.
During the thirty-nine weeks ended December 31, 2009, proceeds from the issuance of the 8.75% Senior Notes due 2019 were $585,492,000 and deferred financing costs paid related to
the issuance of the 8.75% Senior Notes due 2019 were $16,257,000.
During
the thirty-nine weeks ended December 30, 2010, we made principal payments of $95,098,000 to repurchase a portion of our 11% Senior Subordinated Notes due 2016.
In addition, we made payments for tender offer and consent consideration of $5,801,000 for our Notes due 2016. We intend to redeem the remaining $229,902,000 aggregate principal amount outstanding
Notes due 2016 at a price of $1,055 per $1,000 principal amount on or after February 1, 2011 in accordance with the terms of the indenture. During the thirty-nine weeks ended
December 31, 2009, we made principal payments of $250,000,000 in connection with the redemption of our 85/8% Senior Notes due 2012 and repaid $185,000,000 of borrowings under our
revolving credit facility.
Reference
is made to Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources in our Annual Report on
Form 10-K for the fiscal year ended April 1, 2010 for certain information about our Senior Secured Credit Facility, our 8% Senior Subordinated Notes due 2014 (the "Notes due
2014"), 11% Senior Subordinated Notes due 2016 (the "Notes due 2016"), and our 8.75% Senior Notes due 2019 (the "Notes due 2019") and for certain information about Holdings' Discount Notes due 2014
and Parent's Term Loan Facility.
50
Table of Contents
The
indentures relating to our notes (Notes due 2014, Notes due 2016, Notes due 2019, and Notes due 2020) and the Parent Term Loan Facility allow us to incur specified permitted
indebtedness (as defined therein) without restriction, including borrowings under the revolving portion of our Senior Secured Credit Facility. The indentures and the Parent Term Loan Facility also
allow us to incur any amount of additional debt as long as we can satisfy the applicable coverage ratio of each indenture, after giving effect to the event on a pro forma basis. Under the indentures
we could borrow approximately $861,100,000 (assuming an interest rate of 8.75% per annum on the additional indebtedness) in addition to specified permitted indebtedness. If we cannot satisfy the
applicable coverage ratios, generally we can incur no more than $100,000,000 of new "permitted indebtedness" under the terms of the indentures relating to our notes and the Parent Term Loan Facility.
As
of December 30, 2010, the Company was in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2019, the Notes due 2014, the
Notes due 2016, and the Notes due 2020.
Investment in NCM LLC
We hold an investment in 16.98% of NCM LLC accounted for following the equity method as of December 30, 2010. The fair
market value of these shares is approximately $375,504,000 as of December 30, 2010. Because we have little tax basis in these units, the sale of all these units at December 30, 2010
would require us to report taxable income of approximately $508,800,000, including distributions received from NCM LLC that were previously deferred. Our investment in NCM LLC is a
source of liquidity for us and we expect that any sales we may make of NCM LLC units would be made in such a manner to most efficiently manage any related tax liability. We have available net
operating loss carryforwards which could reduce any related tax liability.
Commitments and Contingencies
Minimum annual cash payments required under existing capital and financing lease obligations, maturities of corporate borrowings,
future minimum rental payments under existing operating leases, furniture, fixtures and equipment and leasehold purchase provisions, ADA related betterments and pension funding that have initial or
remaining non-cancelable terms in excess of one year for fiscal years 2011 through 2015 and thereafter are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Minimum
Capital and
Financing
Lease
Payments |
|
Principal
Amount of
Corporate
Borrowings(1) |
|
Interest
Payments on
Corporate
Borrowings(2) |
|
Minimum
Operating
Lease
Payments |
|
Acquisitions
and Capital
Related
Betterments(3) |
|
Pension
Funding(4) |
|
Total
Commitments |
|
2011 |
|
$ |
10,096 |
|
$ |
331,500 |
|
$ |
142,604 |
|
$ |
436,448 |
|
$ |
19,234 |
|
$ |
4,754 |
|
$ |
944,636 |
|
2012 |
|
|
8,894 |
|
|
6,500 |
|
|
154,064 |
|
|
438,158 |
|
|
14,061 |
|
|
976 |
|
|
622,653 |
|
2013 |
|
|
7,926 |
|
|
145,287 |
|
|
153,454 |
|
|
425,731 |
|
|
1,000 |
|
|
— |
|
|
733,398 |
|
2014 |
|
|
7,612 |
|
|
305,004 |
|
|
149,227 |
|
|
399,275 |
|
|
1,000 |
|
|
— |
|
|
862,118 |
|
2015 |
|
|
7,683 |
|
|
5,004 |
|
|
127,051 |
|
|
395,984 |
|
|
1,000 |
|
|
— |
|
|
536,722 |
|
Thereafter |
|
|
76,304 |
|
|
1,654,080 |
|
|
581,638 |
|
|
2,500,207 |
|
|
— |
|
|
— |
|
|
4,812,229 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
118,515 |
|
$ |
2,447,375 |
|
$ |
1,308,038 |
|
$ |
4,595,803 |
|
$ |
36,295 |
|
$ |
5,730 |
|
$ |
8,511,756 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- Represents
cash requirements for the payment of principal on corporate borrowings. Total amount does not equal carrying amount due to unamortized discounts
on issuance. Fiscal 2011 principal payments include the expected repayment of $325,000,000 on the Notes due 2016, of which $95,098,000 has been paid through December 30, 2010.
51
Table of Contents
- (2)
- Interest
expense on the term loan portion of our senior secured credit facility was estimated at 1.76% for the Term Loan due 2013 and 3.51% for the Term
Loan due 2016 based upon the interest rates in effect as of December 30, 2010.
- (3)
- Includes
committed capital expenditures and acquisitions, including the estimated cost of ADA related betterments. Does not include planned, but
non-committed capital expenditures.
- (4)
- We
fund our pension plan such that the plan is in compliance with Employee Retirement Income Security Act ("ERISA") and the plan is not considered "at risk"
as defined by ERISA guidelines. The plan has been frozen effective December 31, 2006. Also included are payments due under a withdrawal liability for a union sponsored plan. The retiree health
plan is not funded.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various market risks including interest rate risk and foreign currency exchange rate risk.
Market risk on variable-rate financial instruments. We maintain a Senior Secured Credit Facility, comprised of a $192,500,000 revolving
credit facility and a $650,000,000 term loan facility, which permits borrowings at a rate equal to an applicable margin plus, at our option, either a base rate or LIBOR. Increases in market interest
rates would cause interest expense to increase and earnings before income taxes to decrease. The change in interest expense and earnings before income taxes would be dependent upon the weighted
average outstanding borrowings during the reporting period following an increase in market interest rates. We had no borrowings on our revolving credit facility as of December 30, 2010 and had
$619,125,000 outstanding under the term loan facility on December 30, 2010. A 100 basis point change in market interest rates would have increased or decreased interest expense on the Senior
Secured Credit Facility by $4,707,000 during the thirty-nine weeks ended December 30, 2010.
Market risk on fixed-rate financial instruments. Included in current maturities and long-term corporate borrowings are
principal amounts of $229,902,000 of our Notes due 2016, $300,000,000 of our Notes due 2014, $600,000,000 of our Notes due 2019, and $600,000,000 of our Notes due 2020. Increases in market interest
rates would generally cause a decrease in the fair value of the Notes due 2016, Notes due 2014, Notes due 2019, and Notes due 2020 and a decrease in market interest rates would generally cause an
increase in fair value of the Notes due 2016, Notes due 2014, Notes due 2019, and Notes due 2020.
Foreign currency exchange rates. We currently operate theatres in Canada, France and the United Kingdom. As a result of these
operations, we have
assets, liabilities, revenues and expenses denominated in foreign currencies. The strengthening of the U.S. dollar against the respective currencies causes a decrease in the carrying values of assets,
liabilities, revenues and expenses denominated in such foreign currencies and the weakening of the U.S. dollar against the respective currencies causes an increase in the carrying values of these
items. The increases and decreases in assets, liabilities, revenues and expenses are included in accumulated other comprehensive loss. Changes in foreign currency exchange rates also impact the
comparability of earnings in these countries on a year-to-year basis. As the U.S. dollar strengthens, comparative translated earnings decrease, and as the U.S. dollar weakens,
comparative translated earnings from foreign operations increase. A 10% increase in the value of the U.S. dollar against all foreign currencies of countries where we currently operate theatres would
increase earnings before income taxes by approximately $608,000 for the thirty-nine weeks ended December 30, 2010 and decrease accumulated other comprehensive loss by approximately
$8,196,000 as of December 30, 2010. A 10% decrease in the value of the U.S. dollar against all foreign currencies of countries where we currently operate theatres would increase earnings
52
Table of Contents
before
income taxes by approximately $202,000 for the thirty-nine weeks ended December 30, 2010 and increase accumulated other comprehensive loss by approximately $10,017,000 as of
December 30, 2010.
Item 4. Controls and Procedures.
- (a)
- Evaluation
of disclosure controls and procedures.
The
Company maintains a set of disclosure controls and procedures designed to ensure that material information required to be disclosed in its filings under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that material information is accumulated and
communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company's
Chief Executive Officer and Chief Financial Officer have evaluated these disclosure controls and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q and have determined that such disclosure controls and procedures were effective.
- (b)
- Changes
in internal controls.
There
has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
53
Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Part I. Item 3. Legal Proceedings in our Annual Report on Form 10-K for the
fiscal year ended April 1, 2010 for information on certain litigation to which we are a party.
We
are a party to various other legal proceedings in the ordinary course of business, none of which is expected to have a material adverse effect on us.
Item 1A. Risk Factors
Reference is made to Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal
year ended April 1, 2010.
54
Table of Contents
Item 6. Exhibits.
EXHIBIT INDEX
|
|
|
|
EXHIBIT
NUMBER |
|
DESCRIPTION |
| |
2.1 |
|
Agreement and Plan of Merger, dated June 20, 2005, by and among Marquee Holdings Inc. and LCE Holdings, Inc. (incorporated by reference from Exhibit 2.1 to AMCE's Current Report on Form 8-K (File
No. 1-8747) filed on June 24, 2005). |
|
2.2 |
|
Agreement and Plan of Merger, dated as of July 22, 2004 by and among Marquee Holdings Inc., Marquee Inc. and AMCE (incorporated by reference from Exhibit 2.1 to AMCE's Current Report on
Form 8-K (File No. 1-8747) filed on July 23, 2004). |
|
2.3 |
|
Unit Purchase Agreement among Kerasotes ShowPlace Theatres Holdings, LLC, Kerasotes ShowPlace Theatres, LLC, ShowPlace Theatres Holding Company, LLC, AMC ShowPlace Theatres, Inc. and American
Multi-Cinema, Inc. (incorporated by reference from Exhibit 2.1 to the Company's Form 8-K (File No. 1-8747) filed on July 14, 2010). |
|
3.1 |
|
Restated and Amended Certificate of Incorporation of AMC Entertainment Inc. (as amended on December 2, 1997, September 18, 2001 and December 23, 2004) (incorporated by reference from
Exhibit 3.1 to the AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 27, 2004). |
|
3.2 |
|
Amended and Restated By-laws of AMC Entertainment Inc. (incorporated by reference from Exhibit 3.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 27,
2004). |
|
|
|
Certificates of Incorporation or corresponding instruments, with amendments, of the following additional registrants: |
|
3.3.1 |
|
Loews Citywalk Theatre Corporation (incorporated by reference from Exhibit 3.3.1 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.3.2 |
|
LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.3.9 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.3.3 |
|
AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.3.93 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.3.4 |
|
AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.3.94 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.3.5 |
|
American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.3.10 to AMCE's Form 10-Q (File No. 1-8747) filed on February 8, 2008). |
|
3.3.6 |
|
Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.3.97 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.3.7 |
|
AMC ShowPlace Theatres, Inc. (incorporated by reference from Exhibit 3.3.8 to AMCE's Form 10-Q (File No. 1-8747) filed on August 10, 2010). |
|
3.3.8 |
|
AMC ITD, Inc. (incorporated by reference from Exhibit 3.3.10 to AMCE's Registration Statement on Form S-4 (File No. 333-171819) filed on January 21, 2011). |
55
Table of Contents
|
|
|
|
EXHIBIT
NUMBER |
|
DESCRIPTION |
| |
3.4 |
|
By-laws of the following Additional Registrants: (incorporated by reference from Exhibit 3.4 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006): |
|
|
|
Loews Citywalk Theatre Corporation |
|
3.5 |
|
By-laws of LCE Mexican Holdings, Inc. (incorporated by reference from Exhibit 3.5 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.6 |
|
By-laws of AMC Card Processing Services, Inc. (incorporated by reference from Exhibit 3.20 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27,
2006). |
|
3.7 |
|
By-laws of AMC Entertainment International, Inc. (incorporated by reference from Exhibit 3.21 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27,
2006). |
|
3.8 |
|
By-laws of American Multi-Cinema, Inc. (incorporated by reference from Exhibit 3.9 to AMCE's Form 10-Q (File No. 1-8747) filed on February 8, 2008). |
|
3.9 |
|
By-laws of Club Cinema of Mazza, Inc. (incorporated by reference from Exhibit 3.24 to AMCE's Registration Statement on Form S-4 (File No. 333-133574) filed on April 27, 2006). |
|
3.10 |
|
By-laws of AMC ShowPlace Theatres, Inc. (incorporated by reference from Exhibit 3.10 to AMCE's Form 10-Q (File No. 1-8747) filed on August 10, 2010). |
|
3.11 |
|
By-laws of AMC ITD, Inc. (incorporated by reference from Exhibit 3.11 to AMCE's Registration Statement on Form S-4 (File No. 333-171819) filed on January 21, 2011). |
|
4.1 |
|
Indenture, dated as of December 15, 2010, respecting AMC Entertainment Inc.'s 9.75% Senior Subordinated Notes due 2020, among AMC Entertainment Inc., the Guarantors named therein and U.S. Bank
National Association, as trustee (incorporated by reference from Exhibit 4.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
|
4.2 |
|
Registration Rights Agreement, dated December 15, 2010, respecting AMC Entertainment Inc.'s 9.75% Senior Subordinated Notes due 2020, among Goldman, Sachs & Co., J.P. Morgan
Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Foros Securities LLC, as representatives of the initial purchasers of the 2020
Senior Subordinated Notes and J.P. Morgan Securities LLC, as market maker (incorporated by reference from Exhibit 4.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
|
4.3 |
|
Fifth Supplemental Indenture, dated November 30, 2010, respecting AMC Entertainment Inc.'s 8% Senior Subordinated Notes due 2014, pursuant to which AMC ITD, Inc. guaranteed the 8% Senior Subordinated
Notes due 2014 (incorporated by reference from Exhibit 4.3 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
56
Table of Contents
|
|
|
|
EXHIBIT
NUMBER |
|
DESCRIPTION |
| |
4.4 |
|
Second Supplemental Indenture, dated November 30, 2010, respecting AMC Entertainment Inc.'s 8.75% Senior Notes due 2019, pursuant to which AMC ITD, Inc. guaranteed the 8.75% Senior Notes due 2019
(incorporated by reference from Exhibit 4.4 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
|
4.5 |
|
Third Supplemental Indenture, dated November 30, 2010, respecting AMC Entertainment Inc.'s 11% Senior Subordinated Notes due 2016, pursuant to which AMC ITD, Inc. guaranteed the 11% Senior Subordinated
Notes due 2016 (incorporated by reference from Exhibit 4.5 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
|
4.6 |
|
Amendment No. 3 to Credit Agreement, dated December 15, 2010 among AMC Entertainment Inc., Citibank, N.A. as issuer and Citicorp North America, Inc., as swing lender and as administrative
agent (incorporated by reference from Exhibit 10.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on December 17, 2010). |
|
10.1 |
|
Second Amendment to the Third Amended and Restated Limited Liability Company Operating Agreement dated as of August 6, 2010, by and between National CineMedia, LLC and American Multi-Cinema, Inc. (filed
as Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-33296) of National CineMedia, Inc., filed on August 10, 2010, and incorporated herein by reference). |
|
10.2 |
|
AMC Entertainment Holdings, Inc. 2010 Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14,
2010). |
|
10.3 |
|
AMC Entertainment Holdings, Inc. Nonqualified Stock Option Award Agreement (incorporated by reference from Exhibit 10.2 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on July 14,
2010). |
|
10.4 |
|
AMC Entertainment Holdings, Inc. Restricted Stock Award Agreement (Time Vesting) (incorporated by reference from Exhibit 10.3 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on
July 14, 2010). |
|
10.5 |
|
AMC Entertainment Holdings, Inc. Restricted Stock Award Agreement (Performance Vesting) (incorporated by reference from Exhibit 10.4 to AMCE's Current Report on Form 8-K (File No. 1-8747) filed on
July 14, 2010). |
|
*31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002. |
|
*31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002. |
|
*32.1 |
|
Section 906 Certifications of Gerardo I. Lopez (Chief Executive Officer) and Craig R. Ramsey (Chief Financial Officer) furnished in accordance with Securities Act Release 33-8212. |
- *
- Filed
herewith
57
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
|
|
| |
|
AMC ENTERTAINMENT INC. |
Date: February 4, 2011 |
|
/s/ GERARDO I. LOPEZ
Gerardo I. Lopez
Chief Executive Officer, Director and President |
Date: February 4, 2011 |
|
/s/ CRAIG R. RAMSEY
Craig R. Ramsey
Executive Vice President and Chief Financial Officer |
58
